Air India proposes 17% reduction in employee costs

Air India reportedly announced a proposal to reduce employee salaries by up to 17%, to produce cost savings of USD153-175 million p/a (TNN, 04-Mar-2010). Last week, the Group of Ministers (GoM), led by Indian Minister for Finance, Pranab Mukherjee, to oversee Air India's restructure, informed that the airline's next tranche of equity support of up to USD259 million (INR12 billion) is subject to the conclusion of negotiations to reduce salary and productivity-linked incentive (PLI) payments. Meanwhile, India's Aviation Industry Employees Guild, a trade union representing Air India employees, stated an employee salary reduction would be considered, "only where performance linked incentives for senior pilots and aircraft engineers are substantial" (The Economic Times, 03-Mar-2010).

Ministry of Civil Aviation: "This will be over and above INR8 billion (USD173 million) equity infusion which was approved by the government last month for Air India. The Government has committed for INR12 billion for Air India in the annual budget. We will discuss this issue after 01-Apr-2010. This does not mean that Air India would keep getting such monetary help from the government. This cannot be done indefinitely, forever. The airline will have to generate and yield profits to keep it going," Praful Patel, Minister for Civil Aviation. Source: BloombergUTV, 03-Mar-2010).