Are mergers the worst decision that an Indian airline can make?

There goes a famous saying in the business world which says, "If you cannot beat them, join them". The same could be applied for an airline since as it happens many times, one airline decides to merge with the other airlines. However, history is evidence of the fact that mergers have been far from fruitful in the Indian Aviation market and sometimes have proven to be disastrous for some airlines. A current Case In point being the Vistara crisis where there has been an outcry by pilots for a change in the pay structure due to their on-going merger with Air India. This made my overthinking self-take a dive about airline mergers in India and their outcomes. Stick around, as this is going to be an insightful one!

Once India's best, now pilotless?

If one has been following the news lately, they are aware of the ongoing issue going on at Vistara with a number of their flights being cancelled significantly affecting their operations. Reason? A number of pilots calling sick leaves. Wonder why? a lot of the pilots are unhappy with the new pay structure and the work hours put forward by the company. Such a change is being seen due to their upcoming merger with Air India as the Tata group plans to consolidate its airlines. The group is also looking to merge Air India Express and AirAsia India.

VT-TSE, A Vistara 787 at Heathrow Airport in London. Photo via Jetphotos

The Thing about Airline Mergers In India

On the surface, the Air India-Vistara merger may seem like a good idea. Both airlines operate on the same full-service career model and most importantly operating under the same group which makes it a no brainer for TATA to merge both of these airlines. However, it goes much deeper than that. Both the companies, at the end of the day, are different entities altogether which operates on a different legal and organizational structure. Due to this, there are vastly different pay structures and work hours for both these airlines which makes it difficult for the merged entity to come on a concrete pay structure and work hours as there may be disagreements by both companies' employees.

When one airline is buying an another, not only they're buying their assets but also their liabilities. Case in point being the Jet Airways and Air Sahara merger in 2006. Although this merger created the biggest airline in India with a whopping market share of 32%. However, during this time Sahara was struggling financially and was in massive debt which Jet also inherited post the merger. This merger was also one of the reasons behind Jet's failure. Another infamous merger was the Kingfisher-Air Deccan merger in 2007. The intent of this merger was to accelerate kingfisher's entry into international markets due to the 5-year rule applied at the time which meant, and Airline had to be at least 5 years old to operate international flights. After which, Air deccan was renamed to Kingfisher Red. However, despite kingfisher able to fly International, the merger was a disaster for the airline as not only there was no impact on the airline's performance, but the airline had also accumulated Air Deccan's high debt. To add to that, both the airline had a different operational model with kingfisher being a luxury full-service carrier and Air deccan being a low-cost carrier (The first of its kind in fact). Their low-cost subsidy also caused the full-service kingfisher passengers to move to them since the ticket prices were lower which caused the mainline kingfisher passenger numbers to drop. There are only however, some of the few airline mergers in India.

Final Thoughts

Although an airline merger seems like a good idea on paper, however airlines need to consider a lot of things before merging as stated through my examples above. Since this is just the beginning of the Air India Vistara merger, only time shall tell what hurdles await the TATA group and how successful this merger has been. For the time being, I hope all gets well soon and the company and employees come on a concrete decision which is a win-win for both the involved parties.