Broad salary cut at Air India unlikely

The ministry of civil aviation is now veering around to the view that an across-the-board reduction in salaries of Air India employees would be difficult to implement.

“It isn’t fair to announce an across-the-board salary reduction. We have now realised that we will have to do a complete overhaul of the salary structure, wage agreements, etc to arrive at a fair picture,” ministry sources said.

According to the sources, the current Air India (formed after merger of erstwhile Indian Airlines and erstwhile Air India) has two distinct sets of employees: employees of erstwhile Indian Airlines (IA) draw far “lower” salaries compared with employees of erstwhile Air India (AI).

Going by official sources, IA the salaries of IA employees are indexed to flying hours, but those of the AI employees are not based on this criterion.

Reduction in salaries and performance linked incentives is crucial to the comprehensive restructuring plan AI has drawn up in a bid to get government support. The airline has sought Rs 5,000 crore equity from the government and as an interim measure, Rs 800 crore is expected to be given.

But now, given the sensitivity of the salary issue coupled with the urgency with which the ministry has to send a note to the Cabinet Committee on Economic Affairs (CCEA) seeking the Rs 800 crore initial equity support, a quick decision on wage revision appears unlikely.

The Rs 800 crore equity support was recommended by a group of ministers and is conditional to the airline showing savings of Rs 2,000 crore by 2010.

Sources said the CCEA note would be submitted over the next 8-10 days and the money is expected to be released during the ongoing Winter Session of Parliament. The gap between revenue generation and expenditure for AI stands at over Rs 4,000 crore a year and it has already received permission to enhance working capital limit by Rs 1,000 crore.
The airline has an equity base of Rs 145 crore, working capital loans of about Rs 16,000 crore and needs about Rs 45,000 crore in tranches to complete an ambitious aircraft purchase order.

In reply to questions in the Rajya Sabha earlier this week, civil aviation minister Praful Patel had said that AI is focusing on cost reduction of Rs 1,500 crore and revenue enhancement of Rs 1,200 crore, as per its turnaround plan.

This plan is segmented into 0-9 months, 9-18 months and 18-36 months and has been segregated under operational efficiency, product improvement, organisation building and financial restructuring.