Mumbai: National carrier Air India Ltd has not paid May salaries to its 33,000 employees and 7,000 casual workers. Productivity-linked incentives (PLIs), which constitute 50-70% of the salaries, have also not been paid for April.
The non-payment of salaries can hurt workers’ morale and undermine the state-owned airline’s chances of making operating profit by 2013 and net profit from 2015 with the help of a proposed financial restructuring plan, according to analysts. Air India’s accumulated losses stand at Rs 13,000 crore; it also has a debt of Rs 40,000 crore.
The Indian Commercial Pilots’ Association (Icpa), which went on a 10-day strike in early May, is bracing for another round of agitation against the airline management. With irregular and partial salary payments, many employees are finding it difficult to meet their monthly commitments for mortgages and car loans.
The last time airline employees got a hike in their salary was in 2007. With inflation staying over 9% for the past 15 months, their real income has been eroded substantially.
“You are well aware that Air India is passing through a very challenging and critical phase,” chairman and managing director Arvind Jadhav wrote to the airline’s employees on Thursday. “Increasing debts, mushrooming interest burden, and increasing fuel costs are financially crippling the company. It is becoming difficult to sustain our operations without cash flows and revenue generation.”
Jadhav has said the airline’s difficult financial situation has led to banks, financial institutions, vendors and suppliers asking for higher costs to cover credit risk. “It is going to be disastrous. If the hygiene is not met in an organization, one cannot expect better commitment from their employees,” said Sandeep Chaudhary, regional practice leader (compensation consulting of the Asia-Pacific region) at human resources consultant Aon Hewitt Consulting.
“The company can have vision and transformational plans, but it has to meet the basic responsibility of compensating people on time. It will also give a wrong impression in their families about the organization that they are working,” Chaudhary said.
The low cash position over the past few years led to oil marketing companies putting Air India on a so-called “cash-and-carry” mode since December, and this is hurting the airline’s normal operations. Under the cash-and-carry mode, the airline needs to pay upfront to oil companies. Till recently, it was getting oil on credit for two-three months.
The strike in May by Icpa pilots led to a Rs 250 crore loss.
There have been rumours about Jadhav resigning from the airline. Mint could not reach Jadhav for comments, despite repeated efforts.
“Unfortunately, the very nature of this organization leads to lot of rumour mongering and grapevine. Do not succumb to such talk and the only antidote to rumour mongering is to do your job/task sincerely and with devotion so that we can justifiably challenge competition...,” Jadhav wrote in his memo to employees.
The civil aviation ministry has meanwhile directed oil marketing companies such as Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd to meet Air India’s fuel requirement for the next three months to help it operate all its flights.
Air India was forced to curtail several flights because it could not afford to pay for buying jet fuel for all its planes.
At a recent meeting between civil aviation minister Vayalar Ravi and petroleum minister Jaipal Reddy, it was decided that Air India will get a three-month moratorium on payment for fuel.
The government owes Rs 1,173 crore to the airline for using its flights for transporting VIPs. It has also committed to infuse Rs 1,200 crore equity.
“Finally, though we tried our best, I am sorry that your salary statement could not be released on 8 June. However, with help from the government, we have got the funds released and your salaries would be credited to your accounts soon,” wrote Jadhav, without mentioning any date for salary disbursal.