Air India has begun a cost-cutting drive and will send around 600 employees on furlough in the first such move by the state-owned carrier.
The airline’s board approved on July 7 the scheme of ‘Leave Without Pay’ ranging from six months to five years. While the scheme is voluntary in nature, if it doesn’t get a good response from employees, the board has authorised Chairman and Managing Director Rajiv Bansal to forcibly send employees on leave. Employees who opt for the scheme will have to notify their departmental heads by August 15.
Air India has 9,426 employees on its payroll, of which 4,200 are on contract.
According to a notice sent by the airline’s human resources department, employees will be judged based on “suitability, efficiency, competence, quality of performance, health, and redundancy”. “During the period of leave without pay, employees will not be paid any basic, dearness allowance or other benefits like pension, gratuity, provident fund, increment. They shall also lose their seniority with reference to juniors,” it said.
Employees staying at staff quarters will also have to vacate the same or rent it back from the airline at the prevailing market price. The move has unsettled the employees, especially pilots and cabin crew, who feel they will be in the firing line.
“The burden should be shared by all departments across the board. If cherry-picking is allowed, then top management will safeguard themselves while burdening others. Management shouldn’t be selfish for a common cause,” said Praveen Keethi, general secretary of the Indian Commercial pilots’ Association, the airline pilot’s union.
The airline, which has been identified by the Centre for privatisation, has accumulated a debt of Rs 69,576 crore. It posted a loss of Rs 8,556 crore in FY19, as against a net loss of Rs 5,348 crore in the previous financial year.
“With aircraft including wide-body fleet grounded, there is a fixed cost of around Rs 700 crore every month. It’s impossible to recoup that with the current condition of the market,” the executive said.
The government, facing pressure on its revenues, has refused to further infuse any equity into the company. It has also hived off almost 60 per cent of the airline’s debt into a subsidiary to clean the balance sheet as part of the sale process.
“There is no doubt that there was some redundancy of staff in the company even before the pandemic. Now scope of business has reduced further. The airline will be flying a lot lesser, use fewer aircraft, and will need shorter teams across departments. In such a situation, the management feels that up to Rs 10 crore can be saved by this furlough programme,” said a senior Air India executive.
He said the drastic step of sending employees on leave was taken after the earlier cost-cutting steps proved insufficient to stop cash loss, even as the impact of the pandemic is set to be longer on the aviation and travel industry.
Earlier in March, 21 steps were announced, which included a 10 per cent cut in salaries, a special drive to recover dues from government departments by March 31, negotiations with aircraft lessors and hotels overseas, increasing cargo loads to make up for passenger loss, and temporarily invoking force majeure in all agreements.
According to rating agency CRISIL, Indian airlines will face a revenue loss of Rs 1.3 trillion between fiscal 2020 and 2022 due to the pandemic.