Airline could seek additional support to run its VRS scheme
Air India needs to cut its unproductive expenditure if it wants to make its operations commercially viable. Downsizing the bloated workforce is an option for the company to reduce its operating costs, which it must consider seriously. Because if it wants to compete with private carriers, it has no option but to learn to operate as a lean and trim corporation.
The Justice DN Dharmadhikari committee report has pointed to the huge wage bill of the carrier and the necessity to bring it down. The airlines now spends about R3,000 crore a year on wages for its roughly 28,000 employees. The employee number will shrink by about 7,000 over the next five years.
The carrier has one of the highest employee-aircraft ratios. It has over 220 employees per aircraft, compared with other international carriers which usually have less than 200 or 150 employees per aircraft.
?It is important for a PSU like Air India to formulate a VRS for its employees so that excess manpower does not unduly increase the wage bill and depress productivity,? the committee has noted.
The committee has also recommended an employee stock option plan (ESOP) to attract more employees to accept such a voluntary retirement scheme. For this, the carrier will first need to value its assets, and decide on the amount of stake that it can offload in the stock market. Under an ESOP, chosen employees get the right to buy a certain number of shares of the company at a predetermined price.
?It (ESOP) also has the potential to increase the sense of belongingness, ownership, commitment and dedication of existing employees to strengthen the company. Even the DPE guidelines support ESOP option to be given to the employees,? the committee has said.
But a practical problem the national carrier faces in implementing the schemes is a depleted cash balance. ?Since the airline has no money to formulate a very attractive VRS for its staff, it would need further support from the government to do so,? said an aviation ministry official.
The cash-strapped carrier is planning to approach the government for some financial support to make the scheme viable. This financial support would be in addition to the R4,000 crore that was allocated by the finance ministry in the last budget.
?It has to be over the budgetary allocation as it would be an additional expenditure for the carrier. The amount to be sought is being worked out,? the official said.
Of the budgeted Rs 4,000 crore, the finance ministry had released R674 crore in April, R1,200 crore and R700 crore in June. Most of this fund has been utilised by the airline to meet its day-to-day expenses. The government has also approved an infusion of R30,000 crore to restructure the airline that has a debt of around R40,000 crore.
The carrier also plans to seek an exemption from the guidelines of the department of public affairs allowing it to offer flying and licence allowances to its pilots and engineers as per industry standards. For everyone else, the committee has suggested salaries as per the DPE norms.
The committee?s recommendation has found support in the aviation ministry. ?Even though level mapping and fixation of pay scales and inter-se seniority exercise may be started immediately, but its factual implementation would be done only after the approval of the deviations from DPE guidelines to be obtained from Union Cabinet,? the ministry has said in its comment to the Justice Dharmadhikari report.
