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BUSINESS
Can Indian aviation industry survive by job & pay cuts?
By
Devajit Mahanta
ON OCTOBER 14, India’s
largest private airline, Jet Airways, terminated the employment of 800
probationary staff which sent shock wave across the country. This was not
the first time job cut happened at Jet; when the airline acquired Air
Sahara last year, they terminated some 1200 jobs. Only difference is the
way it was done this time. They were clever enough to sack probationary
staff without serving any notices, as there is little legal recourse for
these employees. But due to massive protests immediately after two days Jet
Airways chairman Naresh Goyal said he would reinstate the sacked employees.
Recently Kingfisher Airlines, the second biggest private airline after Jet,
cuts the salary of pilots including the trainee co-pilots. According to
Indian Aviation rule for getting the Commercial Pilot License (CPL) you
need a minimum experience of 250 flying hours. The per-hour cost of flying
in India
comes to about Rs 3,500. So many trainee and co-pilots already spent about
Rs 9 Lakh on clocking flying hours to obtain a CPL to kick start their
aviation careers. Justifying its action without concern about recovery of
substantial amounts, Kingfisher spokesman said, Kingfisher lost Rs 2 crore
approximately every day mainly on account of the hike in aviation turbine
fuel price and more recently by the crisis in the financial markets
globally and the downturn in traffic. Now it is visible that the two largest
private players in Indian Aviation, Jet Airways and Kingfisher have become
unlikely bedfellows in a bid to stem hemorrhage cash flows.
Soon after this wave of Jet, state owned carrier Air India
decided to announce introductionof a three-to-five-year leave-without-pay
scheme for some 15,000 non-operational areas employees which would help cut
operational costs for the airline. According to Giovanni Bisignani,
director general of the International Air Transport Association (IATA), Air
India
losses for 2007-08 were being pegged at Rs 2,144 crore as a result of the
global crisis arising out of high aviation turbine fuel (ATF) rates in the
world. The most expensive aviation turbine fuel rates makes up around 40-45
per cent of tickets costs as compared to 35 per cent in global standard.
The Federation of Indian Airlines has now approached the Government for a
$1 billion bailout package. Now the question is on whose money will they be
bailed out? Despite a long 50 years of experience Indian Airlines financial
performance started deteriorating since 1991, when the ‘open sky policy’
was implemented. Open skies means unrestricted access by any carrier into
the sovereign territory of a country without any written agreement
specifying capacity, ports of call or schedule of services. During 1990 to
2001 Indian Airlines cumulative net losses amounted to Rs 14.6 billion
against a cumulative profit of just Rs 1.1 billion. On November 15
state-run Indian Oil marketing companies cut aviation turbine fuel (ATF)
prices by over 12 per cent or Rs 5,580 per kilolitre in line with fall in
international oil prices but airfare won’t fall because they themselves are
reeling from heavy losses.
Many analysts feel that this is the time for Government to handover the
management to the private sector by reducing its own share below 50 per
cent. But Government still not convinced and has put off the disinvestment
of the airline for some more time. To survive there should be systematic
study on Indian Airlines aiming at analysing the productivity change in
relation to the growth in unit cost.To have potential save certain changes
should be introduced- like reducing costs, improving infrastructure to stop
high-fuel wastage and increased asset utilisation, adopting global
standards and invited green team to undertake a fuel efficiency gap
analysis of the airline’s operations, related to emissions reduction and
fuel efficiency. The present-day scenario in the aviation industry is
undoubtedly tough for everyone but to come out from this turbulence
Government should take the initiative in shaping aviation policies,
including environment and commercial freedoms.
Readers can send their feedback at devajitmahanta@gmail.com
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