For the first time in its 77-year history – in a reflection of its deepening financial crisis – government-owned Air India (AI) on Friday asked its senior managers to work without salary for June. Bailout in sight?
About 130 executives, including 38 directors and 92 general managers, will be affected by the order.
But that wasn’t the real story.
Behind Friday’s request to managers, made by Arvind Jadhav, chairman and managing Director of the airline, lies a story of mismanagement and bonuses of up to Rs 1,400 crore (enough to buy four new Airbus A-321s) to its employees over three years even as the airline – founded in 1932 by Tata doyen J.R.D. Tata – was making losses.
The national carrier’s annual wage bill is Rs 3,100 crore. The voluntary wage cut in June will save it Rs 1.50 crore.
A peeved and worried Union government has now ordered an internal meeting on Saturday to discuss the airline’s mess and the bailout it will require.
“They can’t fool us anymore,” said a senior official in the Ministry of Civil Aviation, on condition of anonymity, as he is not authorised to speak to the media.
“We are looking very closely at AI’s finances. It has been drawing liberally from its working capital, which has risen from Rs 2,000 crore three years ago to Rs 16,000 crore now,” he added angrily.
The government wants the AI management to spell out how it plans to cut costs and what it is doing to come out of the red.
“We will also ask the management to specify how much it needs for the bailout,” he said. “The AI management has still not come up with any proposal for a bailout package, though I’m told they’re working on it.”
In 2008-09, the Maharaja, as AI is sometime called (after its mascot), suffered a loss of more than Rs 4,000 crore. The situation worsened in June, and the airline was forced to defer its salaries — Rs 350 crore — for the month by 15 days.
Jadhav has asked all 200 senior executives to ensure their departments save every paisa they can. In May, employees were banned from flying Business Class to make way for paid passengers.
The airline’s union smells a rat. “We fly over 23,000 passengers everyday now. We have seen worse times in the late 90s, when we flew barely 8,000 passengers. Even then salaries were paid on time and airline survived. (The airline’s market share has now come down to 17.6 per cent from 37 per cent in 2004). So, why panic now?” said Vivek Rao, secretary, Air Corporation of Employees Union, which represents about 8,000 of AI’s 31,500 employees.
In December last year, Jet Airways had asked its senior management to take salary cuts of 5-25 per cent to tide over a financial crisis.