Indian unions raise ante in airline merger talks

MUMBAI: Airline unions, mainly in the domestic carrier Indian, are jockeying to make the most of the situation, even as the government moves ahead with plans to merge the airline with sister PSU carrier Air India.Sources close to the process say most unions in Air India have reconciled to the merger, while those in Indian have opposed it and insist that their pending demands be settled before they give their assent to the process. Minister for civil aviation Praful Patel will meet with unions in the two carriers this Wednesday again, in an attempt to sort out the differences.

At stake in Indian are three major issues — that of a wage revision agreement, which is pending since 1997; of clarity on career progression vis-à-vis Air India employees; and finally the contentious issue of the payment of arrears. Senior officials in Indian say the first two issues may be sorted out, but paying the 18,000 workforce arrears for the past decade is not on the cards.

“The payment will be prospective, Indian cannot afford to pay the new wage bill with retrospective effect,” a senior official said. The arrears works out to about Rs 700 crore, and the management does not have the mandate to pay this amount, he added.

Indian generated a profit after tax of Rs 49.50 crore in 2005-06 on a revenue of Rs 5,788 crore. The airline’s current wage bill is about Rs 1,100 crore which will go up by about Rs 140 crore if the new agreement is signed. This will already put pressures on margins, that are shrinking because of stiff competition from the low-cost airlines. However, the unions say the payment should be in retrospective effect. Speaking to ET, regional secretary of the Air Corporations Employees Union (ACEU), AT Raj, said, “The ministry has to step in and accede to our demands.”

The ACEU is the largest among Indian’s eight unions with a following of about 12,000 employees. According to Mr Raj, the other major issue is that of a difference in the seniority and promotion policies between Air India and Indian.

“There has to be parity between people who have joined the two airlines at the same time,” he said. Air India has a time-bound promotion policy, which means that about 60% of the employees joining at lower ranks become officers after 19 years. However, Indian has different rules wherein the employees have to go through an interview and other processes whereby only 30% of them make it to officer levels. “The government has to take this difference into consideration and parity should be given,” Mr Raj said.

Career progression is a serious issue that the management of the two airlines will have to sort out. Though the process has been approved by the Cabinet, the caveat is that the employees’ interests have to be taken into consideration. The process of integration of the two carriers is likely to take 12 to 18 months. It will begin with a legal merger and the formation of a new company, sources close to the development said.