Though the Air India pilots’ strike is over, the national flag carrier’s management is probably not heaving a sigh of relief. Its promise to not slash the productivity-linked incentives (PLIs) of pilots has driven offtrack its plans to save Rs400 crore through manpower cost rationalisation.
The cash-strapped airline has been desperately seeking equity infusion of Rs5,000 crore from the government to sustain its operations. The government had made it clear that funds would be allocated only after a turnaround blueprint was drawn up.
On August 29, the airline submitted a turnaround plan to the Centre, which included pruning operational costs by Rs1,300 crore in the next six months. Of this, saving from slashing of staff salaries constituted the biggest chunk, followed by a cut in fuel costs by Rs300 crore. “While we do not have much control over fuel costs, we need to look at our second highest cost, which is our employee costs,” Jitendra Bhargava, executive director of Air India, had told the media some days back. Air India’s annual wage bill is Rs3,600 crore of which the PLI accounts for Rs700 crore. By slashing the PLI by up to 50%, the airline was expecting to bring that expense down to Rs300 crore.
So, will the airline come out with a new turnaround plan?
Bhargava says the state-owned airline will work out a way to see that its commitment to pilots does not affect the turnaround plan too much. “We have made the commitment and we will work out a way,” he said. Besides trimming manpower and fuel costs, the airline is also looking at snipping Rs100 crore by renegotiating ground-handling contracts at various airports and another Rs200 crore by elimination of wasteful expenditure in various areas and enhanced productivity norms.
Bhargava said route rationalisation, which involves termination of unprofitable sectors and expansion on profitable sectors, was also one way the airline would be able to cut losses. But as a state-owned airline, Air India is bound by some social responsibility rules as well, forcing it to fly to non-profitable centres like Dibrugarh, Imphal, Aizawl, and Port Blair. The airline’s accumulated losses are around Rs 10,000 crore. Last fiscal, it incurred a loss of around Rs7,500 crore.
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