For the first time in its 16-year history, Jet Airways (India) Ltd has found itself in a confrontation with unionized workers that analysts warn could potentially upset an ambitious restructuring plan and make it difficult for management to trim the airline’s 13,000-strong workforce in the future.

Trouble in the air: Jet employees took to the streets in October after 1,900 were sacked. The airline had to reinstate them after the issue took a political turn. It is now facing problems over the sacking of two pilots. Indranil Mukherjee / AFP

Jet, India’s largest airline by market value, has had an association of pilots called the Society for Welfare of Indian Pilots, or SWIP, to redress employee complaints since 1998, but unlike state-owned Air India, with 12 recognized unions swearing affiliations to political parties ranging from the right-wing Shiv Sena to the Left, it has never faced worker unrest or a strike threat.

Until last week.

On 24 August, Jet Airways management received a 14-day legal notice from the airline’s newly formed pilots’ grouping, National Aviators Guild, or NAG, that all member pilots would begin a strike starting 7 September unless the Mumbai-based carrier reinstated two sacked pilots.

NAG, registered on 24 July, claims 650 members. It says the two pilots were terminated from employment because they were instrumental in forming the union, the first pilots’ association at a private Indian airline, which has not been recognized by Jet Airways management. Jet Airways and its wholly owned subsidiary JetLite have a total of 1,069 pilots on their rolls.

“It’s very sad that we have to take a step like this," said NAG president Girish Kaushik. “I love the airline. It’s the most professional airline people will vouch for (it), and we want to keep it that way, but if two people are sacked without reason, it’s not acceptable. It takes years to become a professional pilot, how can you sack them like a daily wage labourer?" Jet, which operates at least 449 flights daily with a fleet of 107 aircraft, in May announced a “comprehensive cost restructuring" strategy which included a withdrawal from uneconomic routes, leasing out of wide-body aircraft to West Asian carriers, a freeze on hiring, temporary reduction of management pay and pruning of executive perks. The airline also said it would close international crew bases “and as a last but necessary measure" trim any excess workforce.

“If management has a free hand, then restructuring becomes an easy exercise. When they (employees) form a union, as a body their views cannot be ignored. The process becomes that much more complex," said M.S. Balakrishnan, a former director of finance and board member of Indian Airlines (now Air India) who dealt with unions in his tenure before retiring in 2007.

Every time Jet has tried to sack employees, it has faced stiff resistance. In October it announced the sacking of 1,900 staff. The employees took to the streets and television images of the protests brought political intervention to end the standoff.

Founder chairman Naresh Goyal went on television to say he was taking everyone back because he understood the “agony" they must have gone through.

“I can imagine because I started my career when I was 18, everybody knows I used to get Rs300 a month salary. I couldn’t sometimes get a meal. I can imagine what you (employees) must have gone through," he said. The sackings were based on the economics of running an airline, he said, but he wanted to “go beyond numbers, figures and money".

The numbers have not been on Jet’s side for some time. While it posted a profit for four of the seven fiscal years it has been listed on the Bombay Stock Exchange, the airline has been in the red since its takeover of erstwhile Air Sahara (now JetLite) in 2007.

In the last fiscal, Jet lost Rs961.41 crore, 47.03% higher than in 2007-08, as it struggled with high operating costs, excess capacity and competition.

Jet started scheduled operations in 1993. SWIP, which claims the support of 790 Jet pilots on its website, was formed in 1998 with the “purpose of interfacing with the management to ensure a smooth and seamless operation of our airline", and was meant to be “non-interfering and non-involving with the other departments". NAG is different. It has the mandate to do what Kaushik terms “thought boxing".

“Now, the SWIP is not a union at all. With this you cannot make an agreement (like on wages), you can’t sign anything. They don’t have a legal authority to do so," Kaushik, who has 20,000 flying hours of experience, said. “The airline has told us in the past, ‘we don’t even need to speak with you’ (SWIP). This encouraged us to have a guild. It’s just to protect our interests."

The next step for NAG is to become a member of the International Federation of Airline Pilots’ Associations a global pilots’ body representing at least 100,000 pilots in some 100 countries.

A senior SWIP member, who asked not to be named because he is not authorized to speak with the media, said a decision whether to dissolve the association will be taken over time. Jet Airways pilots need a union to protect their interests at a time when the aviation industry is trying to weather tough times, he said.

“SWIP is a welfare association representing the airline’s pilots and is recognized by the management of Jet Airways," a Jet Airways spokeswoman said in reply to a Mint questionnaire. “For several years now, the management has held regular discussions with SWIP on various concerns and issues of interest to SWIP members and these discussions have also been the forum for redressal of grievances."

Jet Airways has approached the regional labour commissioner in Mumbai for conciliation. On 27 August, the office of the deputy labour commissioner, central, under the ministry of labour and employment, said NAG cannot go on strike while conciliation proceedings are under way.

Kaushik said the “strike was on" still and NAG will decide which way to lean after talks scheduled for Monday.

Analysts link the formation of the union to insecurity among employees stemming from the economic downturn and its impact on airlines.

“They (employees) all felt that nothing could (go) wrong with Jet (for many years). They were riding high. But last year when Jet went into a tailspin, it put some insecurity in them," said A. Ranganathan, an air safety consultant and a former general secretary of the erstwhile Indian Airlines’s pilots union, the Indian Commercial Pilots Association. “When you have a downturn and insecurity they know only a union can protect them."

Jet’s employee base has more than doubled from 6,608 in 2004 to 13,078 as of March 2009, including several 160 expat pilots, and foreign executive hires at its international offices.

The restructuring exercise and possible job cuts may have been the trigger for Jet pilots to unionize, said another analyst.

“Most global companies have extremely strong unions. When you have such a large expect that there would be unions," said Kapil Kaul, India chief executive of consulting firm Centre for Asia Pacific Aviation. “Companies will have to deal with unions. Tomorrow you will have wage agreements with them."

“For the employees, a union would offer a negotiating platform to bargain with the management on issues such as working conditions and career progression," said Ranganathan.

Lalit Bhasin, a Supreme Court advocate and president of Society of Indian Law Firms, a grouping of the country’s top law firms, agrees. “The formation of (a) trade union is a welcome move as it leads to collective bargaining on the part of its members and gives them a sense of security," he said.

But unions are also known to make aircraft lessors and insurance firms insecure because of concerns about possible sabotage. In the early 1990s, for example, leasing firms used to demand political risk insurance when leasing assets such as aircraft to airlines in India.

Kaul said he does not see leasing firms and insurance firms being wary of India now, given the country is an important market for them. “Most leasing firms deal with strong union cultures. The question appears only if there is a repeated labour dispute history of the airline. It maybe a factor but not an overwhelming factor," he said.

G.R. Gopinath, who started India’s first domestic low-cost airline, the erstwhile Air Deccan in 2003, said that unions gradually tend to become affiliated with some or the other political organization and invariably their leaders get into “power play and corruption".

Kaushik says he is not keen to seek political backing. “So far as I am concerned we are not going for political affiliation. It’s going to mess up the whole airline, I am not for it. But my view is not the only one." For now, NAG only wants the two sacked pilots to be reinstated. “My only agenda is to get the boys on board, we don’t want more salary or privileges. We will talk about other things later on."

Manish Ranjan contributed to this story.