Mumbai: National carrier Air India, seeking cash infusion as part of a government rescue plan, has decided to cut incentive payments for officers and top managers by as much as half in a cost-cutting measure.
The Air India board, which met on Wednesday in Mumbai, said the productivity linked incentive (PLI) would be cut with effect from August and at least 7,000 out of 31,500 employees would be affected.
The officers include executive pilots, executive cabin crew and executive engineers. Air India has not taken a decision on the remaining employees.
Opposition brewing: Air India aircraft at the Mumbai International Airport. The majority of the carrier’s unions have opposed the decision, saying they were not responsible for the trouble the airline is in. Abhijit Bhatlekar / Mint
National Aviation Co. of India Ltd (Nacil) runs state-owned Air India.
“The cut, applicable to all officers, including top management personnel in various management disciplines, will range from 25% for those getting PLI of Rs10,000 or less per month, and 50% for those receiving PLI or flying related allowances of Rs2 lakh or more per month,” Air India said in a statement. “The cut for those receiving PLI of Rs10,001 to Rs25,000, Rs25,001 to Rs50,000 and Rs50,001 to Rs2 lakh will be 35%, 40% and 45%, respectively.”
Nacil in mid-August proposed slashing the incentive for all employees by 50% as it struggles to come out of its worst crisis. The carrier stands to save at least Rs700 crore a year by cutting the incentives, which account for 30-50% of salaries in Air India.
The incentive payments amounted to Rs1,400 crore in 2008-09. With accumulated losses of Rs7,200 crore and borrowings of Rs15,241 crore as of June, up from Rs6,550 crore in November 2007, the cash-strapped carrier had asked for a loan and equity infusion of around Rs15,000 crore from the government. Its current equity capital is Rs145 crore.
The majority of the unions have opposed the decision, saying they were not responsible for the trouble the airline is in.
Significantly, this cut is applicable only to non-unionized employees. “There are about 300 executive pilots who had joined the management cadre after gaining five-six years of flying experience. These executive pilots or engineers are not covered by the union,” said a union official who spoke on condition that neither his nor his union’s name be disclosed. “Moreover, the management not clarified that unionised employees are covered under this PLI cut. We will talk to the management tomorrow (Thursday) on this.”
On Tuesday night, a spokesman of Air India said that the management has, in the wake of the financial crisis affecting all airlines in India and abroad, taken effective steps to control costs in numerous areas.
“With fewer people travelling due to the general economic recession, low fares and poor yields in a market with surplus capacity, there was limited scope for enhancing revenues. The emphasis has, therefore, to be on cost control to bridge the gap between expenditure and income,” he said.
Rival carrier Jet Airways (India) Ltd, India’s largest, had implemented a pay cut ranging from 5% to 25% from 1 May for employees who are drawing above Rs75,000 a month. Other private carriers such as Kingfisher Airlines Ltd have also implemented some cuts.
On Tuesday, at least two major trade unions of Nacil—Indian Commercial Pilots’ Association and All India Aircraft Engineers’ Association—met in Mumbai to oppose the proposal to halve the PLI.
Earlier this month, hundreds of pilots of private sector carrier Jet Airways went on mass sick leave for six days to protest the firing of two pilots instrumental in forming a pilots’ union. The strike resulted in a revenue loss of $8 million (around Rs38.5 crore) a day for the airline.