AI proposes 15-17% pay cut for most staffers

After stiff resistance from its employees against a steep pay cut, National Aviation Company of India Ltd), which runs Air India, has come out with a fresh proposal to impose a 15-17 per cent cut on the total salary package.

The total package includes basic salary, dearness allowance, house rent allowance and payments made under the productivity-linked incentive scheme . The cut, however, would not be applicable on employees (about 4,000, according to unions) who have a gross salary of less than Rs 20,000 a month.

The new proposal, which has to be cleared by the Cabinet, comes a few months after the airline had made an attempt, since aborted, to push through a plan for a 50 per cent reduction in PLI across the board for its 32,000 employees. That plan was targeted to save Rs 600 crore. But, it wasn't pushed through because of stiff opposition from the employees.

PLI constitutes 40 per cent of the company's total annual wage bill of around Rs 3,000 crore. The cut proposed by the new offer is much lower; the earlier one would have cut the salary package by 20 per cent.

The cut in salary would be the key in ensuring the airline is able to raise Rs 1,870 crore from internal resources, a nine-fold increase of what it has been able to rustle up  in 2009-10 (only Rs 202.4 crore). Even in 2008-9, the airline had generated only Rs 429 crore from internal resources.

The blueprint for recovery included introducing advertising through the entertainment system on the aircraft, securitisation of its prime real estate, which includes the iconic Air India Building in Mumbai's upmarket Nariman Point, to raise loans and further rationalisation of routes.

Confirming the new plan, a senior ministry official said: "We have to raise funds through internal resources. The key to that would be a new plan for cut on the overall pay package of employees by 15-17 per cent, rather than go in for a steep cut in PLI, which has been opposed by employees. Through these measures, we hope to save between Rs 700 crore and Rs 800 crore."

The airline will get equity infusion of Rs 1,200 crore for 2010-11 as earmarked in the budget, apart from Rs 800 crore received from the government in the financial year 2009-10. The equity infusion of Rs 2,000 crore was part of the government's decision to bale out the airline from its financial crises and help it reduce its huge losses, as high as Rs 7,000 crore in 2008-09 and  expected to increase by another Rs 4,000 crore in 2010-11.

The airline has not been able to meet its targets for 2009-10, when it was expected to save over Rs 2,000 crore from various measures. It has, according to the ministry, being able to save only Rs 800 crore.