better on-time performance (OTP), a younger crew and better discipline.
Aware that voluntary retirement schemes dont work, the minister has asked the airline to reduce the staff strength by redeploying some 2,000 excess employees in other units of the aviation ministry like the Airports Authority of India (AAI) that are short-staffed. The redeployment will be an ongoing exercise, according to the guidelines issued by the minister.
The ministers diktats could not have come at a better time. With low-cost airline AirAsia already hitting the market and Tata-SIAs Vistara launching in October, the national carrier needs to quickly put its house in order.
Raju has issued instructions to have younger cabin crew members, at par with those of rival airlines; the older lot are to be shifted to ground operations. He has also said that indiscipline, which leads to flight delays, must be tackled firmly.
The minister wants to improve the OTP to above 90% from around 77% currently. Just for perspective: Private sector airline IndiGo has an OTP of 90.5%.
Raju is keen the transition be monitored closely and, therefore, the operational parameters will be reviewed on a monthly basis while the financial parameters will be looked at every quarter by the civil aviation secretary.
"Rationalisation of manpower should be undertaken from time to time and surplus manpower should be considered for redeployment after suitable training in organisations within the civil aviation ministry such AAI, Bureau of Civil Aviation Security and in other organisations in the Government of India, the guidelines say.
It remains to be seen how far the minister is successful in redeploying staff since any reduction in pay and perks often leads to agitations and strikes by the unions. On the face of it, the match seems to be perfect AI having surplus staff while agencies like AAI and the Directorate General of Civil Aviation (DGCA) being short-staffed. AAI currently has 2,046 vacant posts while DGCA's technical staff is 50% of its sanctioned strength.
Manpower reduction is crucial to AI's turnaround strategy since it currently eats up around 19% of its total operating revenue. This number is quite high compared with its private sector peers like Jet Airways (11%) and SpiceJet (9%). During FY14, AI's wage bill stood at R 3,100 crore, which it wants to bring down to R2,900 crore this fiscal. As of June 30, 2014, Air India had 12,529 permanent employees and 7,000 contract workers, with subsidiaries Air India Engineering Services and Air India Air Transport Services adding a further 5,996 and 4,095 staffers.
Air India, which has over R30,000 crore of accumulated losses and over Rs 45,000 crore of debts, is today the third-largest domestic airline with a market share of 18.5% (June 2014) it had a passenger load factor of 78.6% in the same month. The airline reported a R5,389-crore net loss in FY14, marginally lower than the R5,490 crore loss of FY13, though earnings before interest, tax, depreciation and amortisation rose four times y-o-y to R771 crore.
The minister has also said that empty first/business class seats should be offered at discounted rates a few hours before departure to garner additional funds, while tickets/boarding pass and ferry buses can be offered for advertisements to get substantial revenue.