The Air India (AI) board has shot down a controversial proposal by the airline management that would have resulted in a huge raise for Chief Operating Officer (COO) Gustav Baldauf by tweaking his contract agreement.
The proposal comes at a time when the airline, which is saddled with a working capital debt of over Rs 18,000 crore, has no money to pay salaries to its employees and is surviving on taxpayer’s money.
Baldauf was hired for a hefty package of around Rs 3.1 crore last June resulting in widespread resentment. His net income, post tax deduction, is over Rs 2.16 crore of which 60% is the fixed component while 40% is variable.
"The variable component is payable annually after performance review in relation to laid down parameters. If performance is not up to the mark, the variable component can be withheld. So, while fixed component is the assured income, variable isn't," a ministry official said.
The board's approval was sought on January 19 to revise the fixed-variable component ratio to 70:30. This would have effectively meant a hike of Rs 18.5 lakh for Baldauf.
Financial adviser in the aviation ministry EK Bharat Bhushan is learnt to have opposed the move pointing to Baldauf's hefty package and the fact that he was only a few months into the present job.
"Under Baldauf, AI's market share has fallen further. Its transition to Terminal 3 of the Delhi airport was a disaster. His turnaround plan has nothing new to offer," the official said.
A CAG audit has found that AI's losses for fiscal 2010 were Rs 8589.1 crore as against the company's claim of Rs 5,551 crore. The airline has reportedly decided to borrow Rs 600 crore from banks to pay salaries.
"It is criminal to under quote losses so as to show a turnaround by the new management. When they don't have the money to pay the wages, to move for an rise in the payout to the COO is looting the airline and the taxpayer," said Captain Mohan Ranganathan, a Chennai-based aviation expert.
AI did not comment.