Air India's former chief operating officer Gustav Baldauf is an aviation veteran and former EVP and managing director of Austrian Airlines Production Company. He is no stranger to India's aviation industry. Way back in 2005-2007, Baldauf helped Jet Airways set up its international operations after the airline had established itself as a strong domestic player while on a secondment from Austrian Airlines.
He returned to India in 2010 as Air India's COO during the controversial tenure of Air India CMD Arvind Jadhav to develop a five-year restructuring plan for turning around the carrier. It was truncated when Jadhav’s much needed yet radical initiatives ruffled too many feathers and eventually led to a change in leadership.
Baldauf now runs an independent aviation consultancy firm from the outskirts of Vienna. He spoke to Anjuli Bhargava on the problems he saw in the erstwhile national carrier, the Tata takeover and what he thinks needs to be done to pull off a success. Excerpts from a detailed conversation:
Q: What in your view are the biggest challenges facing the Tata-led management in turning around Air India?
A: People, people, people. Air India employees are very deeply steeped in their comfort zones. They knew it was a big company with government backing and that they would be looked after regardless. Nobody was willing to ask the question: what can I do to ensure that the company succeeds. Instead they were all looking at what the government or the management could do to improve their situations. This is the fundamental problem I saw with everyone at the carrier. You can put on paper whatever you want but it is the people who have to do it.
Air India was an institution that was somehow pulling together and providing its employees a lot of things - which I wouldn't call unnecessary - but which are not typically offered by airlines around the world. Yet the employees failed to reciprocate. As Richard Branson said, you take care of your employees and they will take care of your business. But this was not happening in Air India. None of the employees were asking the question: what can I do to make this a success?
We (working with Arvind Jadhav) set up a business plan for the new Air India back then and the plan we believed would have saved the airline. At the time, the brand Air India was considered good, even if the service was not up to global standards. It had very valuable grandfather rights into San Francisco, Latin America and other markets which were not being utilised. We suggested utilising many of those, among a range of other things.
We drew up a turnaround plan which required, above all, the employees to buy into it. But the merger with Indian Airlines had complicated things. Some of the problems emerging from the merger we did manage to resolve but not all. Things were progressing albeit slowly but the change in leadership put paid to the effort. I had a three year contract but the new minister said we can do it on our own and don't need the expense of help from outside. So, we could not complete what we set out to do. I have subsequently seen Air India implementing some of the suggestions and ideas in our plan in bits and pieces. But of course, a full turnaround has not happened.
But now Air India has a new chance to think about what it wants to be; not just the management but each and every employee must be aligned and work towards making this a success.
Q: How would you move forward if you were in the Tata group's shoes?
A: Tatas now have four airlines, cultures, brands, models to manage. One airline is complicated enough and here they have four!
As I see it, they need to have a clear vision or mission - where I want to be in the next five years - and then develop a strategy to reach it. Then effective processes have to be set up to achieve it. This is true for all companies - vision, strategy and processes - not just airlines.
But even after the Tatas have taken charge, I do not see many things that need to fall in place. For instance, a clear vision statement that encompasses all four airlines. I saw a press release in September talking about some elements of a transformation plan for Air India, which is only one of the four airlines. If there is a broader plan, it does not seem to be publicly available.
This kind of vision statement and overhaul plan is needed for each of the four airlines and then for the group. As I see it, it would need a minimum of six to nine months just to draw up something like this but in fact there is already talk of a big aircraft order. In my view, this is like putting the cart before the horse. Aircraft is only a tool and tool selection needs to happen only once you have your strategy in place.
Unless there is a clearly defined vision, a strategy and effective implementation, any turnaround plan is bound to fail as people will tend to work in different directions. After the mission, vision, strategy and business plan are drawn up for all four, decisions should be taken to convert this strategy into reality.
After Mr. Campbell Wilson and the management have drawn up a plan they need to put in place willing and able teams to implement it. The operations, commercial and human resources, all play critical roles. He can at best steer or guide but the actual plan and strategy has to be implemented by the teams he puts in place, who need to be in alignment and driven to achieve the mission. To run an airline efficiently, many things have to fall in place at the same time. Also, in such turnaround efforts, time is of essence. The longer you wait to put things in order, the more likely it is to fail.
Q: What do you think of the mergers announced ?
Two-mergers have been announced but it is not clear why. Vistara is to be merged into Air India but what are the clear benefits of this is not very clear. In fact, if there is no clear advantage to the group as a whole, why even buy Air India. I find even that is not very clear. If after the years of work put in, the Vistara brand disappears overnight, the Vistara employees will be severely disappointed. They have created a good brand over the last seven or eight years. Just killing this brand makes very little business sense. Air India too has a good brand name - only the service is not up to standard for now.
In fact, in this case, I think it is better to keep both brands. Of course, even as both brands are kept alive, there should be no overlap in operations. The type of service offered for the Western markets is slightly different from Eastern and I think Air India could serve the routes to the West of India and Vistara to the East. This is just an idea but I think it’s one worth exploring. Globally, we have seen that whenever people have tried to mix different business models or cultures, it has usually failed.
Moreover, very rarely do mergers work well. In fact, if one looks at such mergers around the world, 60% of them fail because of human resource conflicts. A merger is always a bit of a danger since there is usually some brand dilution, some jobs will disappear and there is overall uncertainty. Employees are worried about their future and this leads to problems for the merger.
Those who cannot adapt have to be let go of. I don't have the numbers but almost half the Air India employees (back when I was there) were over 50 years old and many were resistant to change. Yet one needs to retain some seniors to train the youngsters. So, they should offer a retirement plan gracefully and be respectful towards the people who have to be let go as well. Human resource management is the most problematic piece of change management. One cannot be too careful in handling this aspect.
Take Air India Express. It fills a certain gap and there is a strong business case for it. It acts almost like a shuttle service between a few Indian states and the Middle East, where labor is in short supply. These passengers do not travel often - maybe only once or twice a year - and require a minimum amount of service. It serves a very specific need. Does AirAsia India fit in with this and can the two perform better if merged? I am not sure this has been fully examined.
Q: Not everyone here is convinced of Campbell's ability to pull this off but there is pressure to show results…
There are two things to consider here. Mr. Campbell might know this business well and be competent but he is only one person. Eventually, he can only outline the vision, strategise, steer and guide. He cannot do everything himself. He needs the teams to carry out the changes. You need the right people with the right qualifications at the right time and at the right place. This sounds easy but is very difficult to pull off. The play between core processes in an airline has to be very well coordinated and well oiled to perform consistently each day. The Indian environment has its own unique challenges as I have seen in the past.
Also, I understand the pressure to show results but there is a big boss (Tata chairman) even above the CEO. They need to be clear on what they are trying to achieve first. There is a baby but someone has to first decide the name of the baby, define its characteristics and so on.
Let me cite an example from my own India experience. In 2005, when I came to set up Jet Airways' international operations, Naresh Goyal told me only one thing : he said he wanted to be like Lufthansa or Singapore Airlines and then he said: go and do it. He gave me no further instructions and told me to ask him no further questions. He did not get involved in the nitty gritties. He defined the vision, brought me in and then demanded results. There was total clarity and how we achieved what he wanted was our problem. Despite the fact that we had to induct foreign pilots - which raised its own set of problems in India at that time - we managed to launch a high quality international operation for Jet. Defining the goal clearly and leaving professionals free to do their job had a lot to do with it. The credit goes to Mr. Goyal.