Cornered by protesting employees and unflattering media reports over the past week, the country's second largest airline Jet Airways has reportedly scrapped plans to trim its operating costs through salary cuts.
"The salaries were earlier put on hold because the management had expected to convince everyone to take a cut, but were released after the chairman's assurance that there will be no cut," a Jet executive told The Economic Times. Chairman Naresh Goyal conveyed this to a section of the employees who met him on Friday. He also assured the staff that the airline is well placed to encash on the growth that the Indian aviation market offers. The same day the airline credited employee salaries for July.
The buzz earlier was that having posted a loss of Rs 1,040 crore for the fourth quarter of fiscal 2018, the airline was in serious damage control mode and had informed its employees that a 5-25 per cent salary cut was on the cards. The top management had reportedly also told employees that though market leader IndiGo boasted a bigger headcount, its salary outgo was lower than Jet's.
Confirming the pay cut news, last week Jet Airways had said "Payroll is one of the important components of cost structure and the senior leadership has undertaken a reduction in salary to lead by example". Given that the airline boasts an annual salary bill of Rs 3,000 crore, the proposed cuts were expected to save around Rs 500 crore. But while Jet's top management has already taken a salary cut, the rest of the employees, including pilots and commanders, had protested against the development.
Citing airline officials the daily added that Goyal had also sought help from the staff in salvaging the airline's image that has taken a beating after media reports on pay cuts, pink slips, dire financials - which the airline recently denied in a regulatory filing - and cancellations across the network. "You help me out.. I will not forget it," people who attended the meeting quoted Goyal as telling the employees.
With Friday's meeting ending the impasse between the airline and the staff, the National Aviator's Guild, a trade union comprising Jet Airways pilots, issued a statement saying "We are endeavouring to assist our company in facing these challenges by meeting with the management and being a part of the solution in achieving cost-efficiencies and enhancing our service standards".
The association also asked members to support the airline. "Most of us have been loyal employees of Jet Airways and it would be a matter of pride to be a part of ensuring that it maintains its position as India's premier airline, here and abroad. We look forward to a long and continued relationship with the company and are confident of the airline's sustainability in short as well as the long term. We advise members to help us achieve our common goals," the statement added.
There is no denying the fact that the airline is facing headwinds in several areas. "For the full year ended March 31, 2018, we reported a loss of Rs 636 crore as against a profit of Rs 1,499 crores for fiscal 2017 [including the impact of the switch to Indian Accounting Standards]," Amit Agarwal, the airline's Deputy CEO and CFO, had admitted on the last earnings call in May. That's the first loss after two consecutive years of profits.
Significantly, he told analysts that the fourth quarter results had been adversely impacted by factors like the "year-on-year impact of increase in fuel prices by Rs 366 crore" and "mark-to-market adjustment due to weaker rupee of amounting to Rs 156 crore". On the same call, CEO Vinay Dube had pointed out that the cut-throat competition in the business had caused airfares to largely remain flat over the last two years even as fuel prices doubled.
All these factors continue to be a concern, although oil prices have stopped flirting with the $80 a barrel mark of late. The airline is due to announce its Q1 results later this week, and a clearer picture will emerge. But if arch rival IndiGo's quarterly record is anything to go by, there is little room for optimism - India's largest carrier by passengers flown last month reported a 97% drop in profits for the first quarter of this fiscal.
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