Removing a key hurdle in the proposed merger of two state-owned airlines, the ministry of civil aviation has decided to hike salaries of Indian’s employees to bring them on par with their soon-to-be colleagues at Air India.
The move, which was confirmed by a senior government official in the ministry who asked not to be identified, will saddle the combined entity with an extra Rs133 crore wage bill and pretty much wipe out the combined net profit of both airlines, based on the reported salary costs and profits at the airlines for the fiscal 2005, the last year for which such data is available.The wage figures and audited results for fiscal 2006 have not been published.
Indian’s employees currently get paid as much as 15% less than their comparable Air India counterparts.
“There will be no discernible difference (in wages),” the official said when asked if there would be a gap in salaries of employees at the airlines after they merge.
A parliamentary process to clear the Air India and Indian merger is about to wrap up within the month, with Praful Patel, the civil aviation minister, championing the merger. The committee has approved the merger, “in principle,” the minister said on Thursday but had postponed a final decision until he met representatives of the airlines’ employees, who together totalled 33,740 in 2006. Calls to Patel’s office on Friday for comment were not returned.
The two state-owned airlines operate independently of each other, with Indian flying domestic routes and some flights to neighbouring countries, and Air India flying mostly internationally. In the last 10 years, both have made occasional net profits, but racked up operational losses as they lost revenue and market shares to private airlines.
In under 15 years, Indian has gone from carrying all domestic air traffic to falling well behind private carriers. Jet Airways, started in 1993 by a former travel agent, is now India’s top airline by passengers it carries followed by budget carrier Air Deccan. Indian is No.3.
The decision comes after pressure from strong workers unions at both airlines. Employees at Indian, which with 18,324 workers will make a majority of the merged airlines’ workforce, have been the ones asking for wage parity.
“We will settle for nothing less,” said J.K. Badola, general secretary of the 14,000 member Air Corporation Employees Union, the biggest workers’ group at Indian.The unions have said earlier the wage differences are closer to 30-40%, but that’s mostly for lower-wage workers.
Both carriers are considered over-staffed by global standards. Together, they have about 300 employees per aircraft, compared with about 120 at American Airlines and 180 at British Airways.
Patel said he felt that as the airlines begin inducting new planes into their fleet, the staffing ratio will improve to “internationally appropriate levels.” Both airlines together are expecting 111 new aircraft in the next six years, financed by over Rs15,000 crore debt which will have to be retired in 12 years, according to spokesmen for both airlines.
(P. Manoj in Mumbai and Tarun Shukla in New Delhi contributed to this story.)