Mumbai: It was about 2am on Sunday when the 10-hour parley came to an end in Room 401 on the fourth floor of a nondescript hotel near Mumbai airport. Saroj K. Datta, counting himself lucky to catch a few scattered hours of sleep over the week, signed a memorandum of understanding that would lead to Jet Airways (India) Ltd’s pilots going back to work and restoring the schedule of the country’s largest private airline that had been crippled for the past five days.
“Jet Airways used to earn a revenue of $8 million (around Rs39 crore) a day. This has dropped drastically. The average number of domestic passengers carried has come down to 7,500 from 23,000 passengers a day. The actual losses due to disruptions is not yet estimated,” said Datta, executive director at the carrier.
The deadlock between Jet and the National Aviators Guild, or NAG, the newly formed pilots union at Jet Airways, had resulted in the cancellation of 1,280 flights, both domestic and international. At least 500 of 760 Indian pilots reported sick following the sacking of the two pilots who had led the formation of the union. Two more pilots were fired subsequently.
Jet agreed to take back all the four flight commanders—Sam Thomas, D. Balaraman, Venkat Vinod and Suhel Jain—and said no action would be taken against those who had stayed away.
Photo: Rajanish Kakade/AP. Graphics: Sandeep Bhatnagar/ Mint
In a 10 September report, Sachin Gupta, an analyst with brokerage firm HSBC Securities and Capital Markets (India) Pvt. Ltd wrote that Jet was losing about Rs19 crore in revenue and that Rs14 crore would be added to FY10’s estimated losses for each additional day of disruption.
Datta said the airline would have normal operations by Monday. To help lure back some of the passengers who weren’t best pleased by the cancellations and delays, Jet announced a 50% cut in economy fares on all domestic flights for bookings made 14-16 September. The limited offer is valid for travel until 18 September.
While Jet’s founder chairman Naresh Goyal, who said this was the most challenging time the airline has faced in its 16-year history, orchestrated negotiations, long-time trusted lieutenant Datta, 69, was his man at the negotiating table. Datta would pop out of the room at Hotel Athithi every 30 minutes through Saturday night to talk to Goyal.
The weekend talks came after an inconclusive 9-hour meeting in New Delhi on Friday.
While Datta was frequently consulting Goyal and other management members, NAG officials were shuttling between Hotel Athithi and nearby Hotel Bawa International, where about 250 Jet pilots were holding out.
The two sides agreed that “a consultative group or body be put in place which would have at least two directors from the board of Jet, the CEO and two representatives of the pilots on one side, and would have five representatives of the pilots on the other, so that a continuous process of dialogue can be in place,” Jet and NAG said in a joint statement. “All issues that are causing concern to the pilots and all future issues would be discussed and resolved through the mechanism,” it said.
Capt. Girish Kaushik, president of NAG, described the agreement as a “win-win” situation. He said NAG will continue to exist.
Still, the pilots will not pursue re-registering NAG as a union in case the registrar of trade unions, who has sought clarifications, is opposed to it.
The union may have to be dissolved if this is the case, said a person close to the development, who did not want to be identified because he’s advising the management.
The pilots are confident that won’t happen.
“We have fulfilled the legal requirements for a union. We will see how it goes. The law of the land will prevail. It is not who wins and who loses. It is all about taking a step forward to make Jet Airways the best airline in the world,” Kaushik said.
The image of the airline has suffered on account of the disruption, M.S. Balakrishnan, former director of finance at Indian Airlines, said.
“This can’t be seen as a victory for Jet Airways nor will it set a healthy precedent since it has taken four dismissed pilots back. The image of the airline has taken a beating and it has lost all respect. It is unlikely that the management will be able to prevent the functioning of the NAG as a union,” Balakrishnan said.
Datta said the management and pilots would appear before the regional labour commissioner on Monday to apprise him about the developments.
Goyal is opposed to unions because of concerns over lenders.
“We were able to manage funds from banks at lower interest rates. But a union that will interrupt operations is a concern for the banks,” Datta said. “Though Air India has got a strong and active labour union, it raises funds with the backing of” a sovereign guarantee, he said.
With corporate traffic slowing and ticket yields under pressure, the Mumbai-based airline group has reported a Rs225.31 crore loss for the quarter to 30 June against a net profit of Rs143.38 crore for the year-ago quarter.
The profit in the quarter to June 2008, however, was boosted by a reversal of depreciation. Jet had a total debt of Rs16,048 crore as on 31 March 2009. According to a senior Jet Airways executive, it has appointed Swiss bank UBS AG and IDFC-SSKI Securities Ltd to raise at least $400 million through qualified institutional placements.
This executive, who is not authorized to speak to the media, said the carrier, which was in the market for raising funds for the last four years, is planning to raise the money before November.
“If the pilots disband their recently constituted union, it would be a positive for the company and should improve its prospects of restructuring the cost base,” HSBC’s Gupta wrote.
The resolution of the strike took place amid the intervention of several key offices. The Jet stir led to a spike in fares by as much as four times, prompting the Directorate General of Civil Aviation, the regulator, to warn against the exorbitant tariffs.
The Prime Minister’s Office meanwhile wanted the aviation ministry to end the stalemate. While Goyal camped in New Delhi to lobby the aviation and labour ministries, Congress parliamentarian Sanjay Nirupam and Trinamool Congress parliamentarian Dinesh Trivedi in turn put pressure on the airline founder to end the stir.