As Air India cuts cost, staff strength plunges 8%

State-owned Air India, which reported an operating profit of Rs 105 crore during FY16, in what was seen as early signs of a turnaround, also managed to increase its revenue per regular employee by over 12% to Rs 1.09 crore in the year. This was achieved by reducing the number of regular employees to 19,401, down 8% compared with FY15.

Air India, which received a bailout package of Rs 30,000 crore by the government in 2012, had frozen hiring of regular employees in 2012 and has since hired pilots and cabin crew on contract. This improved the airline-to-employee ratio to 1:120 (excluding subsidiaries) compared with 1:139 in the earlier fiscal. This was at a time the

airline’s revenue for FY16 declined marginally by 0.42% to R20,256 crore. Additionally, the carrier has continued to bring down cost of its bloated staff to 10.5% of total expense from 12.6% in FY15.

During FY16, the carrier managed to cut its losses by nearly 35% to R3,836 crore. However, officials are now sceptical of any further drastic improvement in the company’s fortunes as they feel that whatever was possible has already been achieved and it would be difficult to continue the momentum amid constraints faced by the state-owned company.

There are still areas where it is far behind its private sector peers. For instance, the aircraft utilisation rate of Air India continues to be at 9.5 hours in a day against a standard 12.5-13 hours for most private airlines.

“It would be very difficult for us to substantially improve on most counts any further but a better aircraft utilisation is even harder as it’s a legacy problem that is peculiar to government-owned companies,” a senior airline official told FE.

Additionally, while the airline has managed to trim its staff size by hiring contractual staff as pilots and for cabin crew, it would have to start hiring regular employees for administrative posts as these can’t be on contractual basis. “As more senior officials retire, we would have to start hiring regular employees in a staggered manner soon. This could adversely impact expenses unless we improve in other areas,” the official said.

The biggest challenge for the carrier remains pay rationalisation for pilots of Air India and the erstwhile Indian Airlines. Air India had introduced a new salary structure from January 2013, which entailed a pay cut of up to 15% for licensed category employees. The new pay structure also did not include the productivity-linked incentive (PLI). The airline, however, has since failed to bring about 2,500 of the remaining staff, which includes 1,700 pilots and 800 cabin crew, under the ambit of the new salary structure as Air India pilots have opposed the same. This has been a source of discontent among the staff members and continues to simmer for lack of resolution.

“Although we have managed to avoid any strike since 2012, this is far from an ideal situation. The company has held regular talks with these employees and hopes to find a solution soon,” the official said.