Drop in earnings, exit of top executives hit aviation

Drop in earnings, exit of top executives hit aviation

Mumbai: In the past 15 months, the steep decline in earnings for India’s airlines has been matched only by a steady exodus of senior executives from domestic aviation companies.

That trend was highlighted when Wolfgang Prock-Schauer quit as chief executive of Jet Airways (India) Ltd, the country’s largest private carrier by passengers, on 15 October to move to Europe on a new assignment.

Also See Talent Drain (Graphics)

Other recent senior executives’ exits in the sector are JetLite (India) Ltd’s chief operating officer Patrick Rastov, and three vice-presidents at Kingfisher Airlines Ltd—Ratan Ratnakar (revenue optimization), Vikram Malhotra (marketing) and Siva Ramachandran (global sales).

“The talent drain of the Indian airline industry is a phenomenon that came to the fore in the last 12-15 months with an element of panic among employees," said Ganesh Shermon, partner and country head of people and change practice at KPMG Advisory Services, an audit and consulting firm. “With this, the aviation industry is currently undergoing a degree of turbulence. The airline industry is notorious for not learning from other industries."

Many of these executives are, in fact, not just exiting from the airlines but the sector itself. Kingfisher’s Malhotra, for example, is joining Balaji Motion Pictures Ltd and in the past, Jet’s A.S. Bedi (general manager, security), quit to join Wal-Mart India Technical and Consulting Pvt. Ltd, which advises US discount chain Wal-Mart Stores Inc.’s retail joint venture in India with Bharti Enterprises Ltd.

The main reason for the exits is the imbalance in rewards created by the industry’s “old-fashioned and outdated human resources practices", said Shermon. He added that technical staff in airlines were given higher compensations than the others and the “pilots are a class among themselves".

Other key triggers, according to him, were the steep losses in the sector, job cuts and the strengthening of recession-proof sectors such as retail and insurance.

Domestic airlines posted a combined loss of $2 billion (Rs9,280 crore) in the year ended March and are likely to register a similar loss in the current fiscal. Since May, at least 2,000 employees at private airlines have lost their jobs.

“I would not want to return to the airline industry at least for the next five years, considering the financial turmoil," said Jehangir Mehta, who was senior general manager handling training and resource development at Jet Airways until mid-2009.

Mehta, who had been in the aviation industry for about 30 years, is now chief operating officer at Future Group, which runs India’s largest listed retailer Pantaloon Retail (India) Ltd.

Bedi, who quit Jet in 2008 after nine years in the company, does not see much growth for the industry at this point.

“I don’t think I will go back to (the) airline industry," Bedi said, adding that there were better options in sectors such as retail. He is now vice-president at Wal-Mart India.

“Unlike the professional working environment in European airlines, leading private airline groups (in India) have too much of owner-driven atmosphere," he said. “For retaining talent, Indian airlines need to do away with this proprietary syndrome."

At Jet Airways, for instance, founder-chairman Naresh Goyal, who has an 80% stake in the airline, takes the final call on key decisions.

Santosh Chalke, senior general manager (human resources) at Jet Airways, argues that the exits are unrelated to such a structure as companies in other sectors, too, are owner-driven. “Earlier, airline was a premium segment with scope for (a) lot of growth. Now, it has become a non-premium segment with less scope for growth," he said.

Surajit Banerjee, former vice-president (human resources) at SpiceJet Ltd and now director (finance) at hospital chain Max Healthcare, said senior executives take the brunt of cost cuts by airlines looking to ease the pressure on their revenue margins.

“The operational executives at an airline is a highly paid category. Therefore, automatically the focus goes there," he said.

Banerjee sees the exits as temporary. He expects some top executives to return to the sector in two-three years, as would he, given a long-term assignment.

Partha Sarathi Basu, who quit SpiceJet as chief financial officer in November 2008, says aviation is a “great" industry to work in.

“My exit was not because of troubled times...but my genuine interest in the distribution side of FMCG (fast moving consumer goods) and durables," said Basu, now vice-president of finance and cost productivity at Whirlpool of India Ltd, the local arm of the US home appliance maker.

Graphics by Ahmed Raza Khan / Mint