State-owned airline Air India has started on a cost cutting drive and will send around 600 employees on furlough. This is the first time the public sector company has taken such a decision.
The Air India board on 7 July has approved the scheme of Leave Without Pay (LWP) for employees for a period ranging from six months to five years. While initially it is voluntary in nature, the board has also authorised Chairman and Managing Director Rajiv Bansal to forcibly send employees on leave.
According to a notice sent to employees 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,” the notice said.
Employees staying at staff quarters will also have to vacate the same or rent it back from the airline at prevailing market price.
The move has unsettled the employees especially pilots and cabin crews who feel they will be in 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 Indian Commercial pilots’ Association, the airline pilot’s union.
The airline which has been identified by Government of India for privatising has accumulated a debt of Rs 69,575.64 crore. It posted a loss of Rs 8,556.35 crore in FY19, against a net loss of Rs 5,348.18 crore in the previous fiscal.
“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.
Facing cash crunch, the government has also refused to further infuse any equity into the company as it has already hived of almost 60 percent of the airline’s debt into a subsidiary to clean the balance sheet as part of sale process.
“There is no doubt that already 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 less aircraft, will need smaller teams across departments. In such a situation the management feels that upto Rs 10 crore can be saved by this furlough program,” said a senior Air India executive.
He said that the more drastic step of sending employees on leave was taken after previous cost cutting steps proved insufficient in stopping cash loss as impact of the pandemic is set to be longer on the aviation and travel industry.
Earlier in March, a 21 step process was announced which included a 10 percent cut in salaries, 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 revenue loss of Rs 1.3 trillion between fiscal 2020 and 2022 due to the pandemic.
Airlines are also unlikely to recoup from this loss and bounce back to pre-pandemic levels of double-digit growth at least in the medium term, said the report.
Other private airlines have already sent their staff on 'Leave Without Pay' with most extending it every month