Jet Airways’ top management is expected to face tough times as it meets pilots on Wednesday and Thursday to negotiate salary cuts of around 15% with a reduction in leaves.
Jet’s CEO Vinay Dube, along with EVP flight operations & engineering Nikhil Vaid and chief people officer Rahul Taneja, will be addressing the pilots in Mumbai and Delhi first, followed by an open house to discuss the proposed salary cut with the representatives of the National Aviation Guild (NAG), Jet’s pilot union.
Jet has about 2,000 pilots in its 16,000-strong workforce and according to sources, the pilots are in no mood to agree to the management’s proposal of salary reduction. “If pilot salaries are touched there will be repercussions. The management needs to find alternate means, asking pilots to take a salary cut will not be acceptable,” said a senior pilot.
There is a reason why the Jet management is worried about the employee costs and why Jet wants to reduce its manpower spend. Jet Airways , the second largest airline by market share (around 14%), has not posted a profit for the past 11 years, barring FY16 and FY17, but its employee costs have been on the rise. For example in FY18, the airline incurred Rs 3174.22 crore in employee costs, up from the Rs 3084.21 of FY17, which in itself was a big jump from the Rs 2,532.33 of FY16. In FY17 alone, employee costs shot up by a big margin of 21.79%.
If we compare this to the increase in revenues for the past five years for Jet, the numbers are not too encouraging, as employee costs grew at a CAGR of 13.7% for Jet but revenues grew at just 4.8% — the reason why Jet’s management has been constantly emphasising a reduction in its non-fuel CASK costs every quarter. Jet’s competitor IndiGo, which has expanded in the market adding almost three aircraft every month, now has a much better performance (see table) whereby for the past five years on a CAGR basis its revenues grew 20.13% and employee costs went up by 28.63%. Also, IndiGo’s manpower costs have shown a steady rationalisation.
Jet over the past year is aggressively targeting paring its debt that stood at Rs 3,000 crore by the end of Q4FY17-18. Jet’s management had stated that the airline expects a blip in its efforts till the second quarter of the current fiscal. Jet has a gross debt of Rs 8,424 crore of which Rs 2,054 crore is aircraft-related debt and 65% of its debt is in dollar denominations.
“Jet Airways is committed to creating a competitive cost structure that ensures a sustainable future for the airline and its stakeholders. As part of its cost rationalisation measures the airline continues to evaluate all initiatives to achieve greater business efficiencies. Payroll is one of the important components of the airline’s cost structure and the senior leadership team has undertaken a reduction in their salary to lead by example,” a Jet Airways spokesperson said.
By- Manisha Singhal