AI bid to trim wages runs into turbulence

Air India’s bid to cut financial flab by pruning the productivity linked incentive (PLI) of employees has run into rough weather with the employees’ unions staying firm on their opposition to any such move.

PLI accounts for a major chunk of the salaries of the staff and the cash-strapped airline plans to save at least Rs700 crore from its hefty wage bill by trimming it.

A senior official in the ministry of civil aviation said that this is a crucial component of the airline’s Rs1,200-crore cost-reduction plan. Air India needs to furnish the plan before approaching the government for fresh equity induction since cost reduction and revenue announcement measures are conditional to money coming from the government.

A board meeting scheduled for Thursday to decide on cutting PLI between 20% and 50% was called off after staff opposition and a general feeling that bonus should not be cut till the festival season and Maharashtra assembly elections were over.

Arvind Jadhav, chairman and managing director (CMD), Air India, was to chair the meeting, which has now been slated for Tuesday.

Sources confirmed that the CMD would be “going slow” over the contentious issue.
“A PLI cut would have resulted in savings of around Rs700 crore but it is a contentious issue. Air India will have to find other means to reduce the wage bill,’’ another ministry official said. A cabinet note seeking Rs5,000-crore equity support from the government is likely to be ready next week, the official said.

On the sidelines of the Air Transport Symposium in New Delhi on Wednesday, civil aviation minister Praful Patel had alluded to the AI board meeting slated for Thursday and pointed out that apart from PLI reduction, AI has undertaken cost reduction measures, including route rationalisation. The airline’s wage bill is about Rs3,500 crore.

On AI’s plan to launch a low cost domestic service under the AI Express umbrella, the ministry official said the plan had been put on the backburner. There is no clarity on measures the national carrier needs to adopt to enhance revenue generation.

The Rs5,000-crore equity infusion is expected to come in tranches over three years and unless this demand of AI is cleared in the supplementary demand for grants for 2009-10, no money may come to its coffers till the next fiscal.