Column : Jet, set, then they were told, go

The economics of the airline business are brutal. Warren Buffet says that if any airline investors had been around when the Wright brothers took the flight, they should have shot them down. Richard Branson says the best way to make a billion dollars in the airline business is to start with two. It?s a high fixed cost business where it costs almost as much to fly a plane full of people as it does to fly an empty plane. Finally, in the Indian context, there is no such thing as a low cost airline but only a low fare airline.

I have long been an admirer of Jet Airways as a symbol of service excellence and deep vision. It must be terrifying to run a company that loses many crores per month (estimates vary between 10 and 30 crores but all that matters is that the number is too large to manage) but in a crisis cool heads must prevail. Their actions this week suggest that rookies were in charge; calling their human and industrial relations skills a sewer would be giving sewers a bad name. They acted without dignity, understanding and respect and for that they have suffered.

But the Schadenfreude (German for joy in other people misery) at Jet?s volte face and Mr Goyal?s painful press conference is misplaced. Only those who have never been responsible for paying somebody?s salary will suggest that any leader finds joy in letting go of people. I don?t know any leader who does not find the conversation with an employee that is not working out the most stressful and painful thing about his or her job. One of my colleagues cries before and after each of these conversations. One of them has tried to give up smoking for two decades but the habit comes back every time such a conversation is required. But just like sometimes you have to cut off a finger to save an arm, sometimes companies, people and institutions have to make tough decisions. Jet Airways faces an existential and survival crisis that will put 11,000 more jobs at risk if it does not create some balance between its costs and revenues. This balancing requires decisions that need to be objective, clinical and painful. But isn?t that life?

But nobody can defend how badly they executed their decision. It threw due process, dignity and listening to the winds. India?s five star hotel industry will double in the next 18 months and most of these charming young men and woman could have found jobs there immediately or eventually with outplacement assistance. Most of these kids are from a generation that does not have expectations of lifetime employment but even the ?taxicab? employment relationship demands respect, conversation and dignity. I suspect (and have bet an expensive dinner with one of my colleagues) that many of the employees taken back will leave over the next six months. Most of them are too talented, spirited and confident to spend their time at an institution that handled them without respect.

We will never know what happened behind the scenes but the politicisation of labour relations and the criminalisation of politics create a combustible cocktail that could lead to a situation where entrepreneurs will hesitate to create organised sector jobs. Jobs creation is more art than science and requires courage, persistence and vision. Job preservation can never be a form of job creation. Corporate India silently and stoically absorbed the massive costs of attrition and wage inflation during high tide, should they be the only ones to share the pain of low tide?

In turbulent times it is important to remember Einstein?s warning to ?make things as simple as possible but not simpler?. Despite what politicians may say, the fundamentals of business are simple. Shareholders or entrepreneurs do not pay employee salaries but customers do. No business that loses money with every unit it sells can be viable. Businesses that have a birth defect need a new business model or must pack up. It?s fascinating how easily humans accept the creative destructive of nature and the cyclicality of seasons but believe that economics and business are exempt. The notion that Jet can survive without rationalising its cost base (including employee costs) is delusional. No politician can guarantee that Jet will be around in five years if it does not match revenue and costs over time. Remember that union and political pressure in the employee costs and benefits of General Motors have brought the market capitalisation of the company to $2 billion (Toyota, ironically started the same year as Hindustan Motors, has a market cap of $120 billion). It?s fascinating how politicians gave the insane airline bailout package proposal lip sympathy but will not support the private sector trying to heal itself.

There is no question that Jet could have handled things differently. This will energise the opponents of labour reform but drunk driving is not an argument against cars. This incident combined with the Noida killing only reinforces the need to urgently and radically revamp our 3E?s (education, employability and employment) to create access and equality of opportunity.

Mr Naresh Goyal must feel agonisingly alone but tough times don?t last and tough people do. Jet is a remarkably well run company that stupidly handled some of its people. But only someone who has never built a company can find joy in what happened and believe that Jet did not act out stupidly out of a fear of survival.

The author is chairman, Teamlease Services