Air India is to cut by 50 per cent the Productivity Linked Incentive (PLI) scheme for its employees and flying allowance to the crew.
An alternative formula for incentive payment will be put in place within three months.
PLI accounts for 30 to 70 per cent of the monthly wages of the airline employees.
The decision was reached after a meeting of the airline board in Mumbai on Thursday. A statement issued after the meeting adds that the board decided to evolve an alternative formula for governing incentives, linked to the company’s expected performance in terms of on-time performance, yields, seat factors, operating margins and profitability.
The board decision is part of rationalisation of operating costs at a time when airlines globally are facing a severe liquidity crunch on account of falling markets and high input costs.
“Employees salaries cannot be touched but the PLI needs to be brought in line with Government guidelines. The salaries will be paid from the money that the airlines is making,” sources said. The airline, which is likely to report an accumulated loss in the range of Rs 7,200 crore as on March 31, this year, has a monthly wage bill of about Rs 350 crore.
Sections of Air India employees Unions including the Cabin Crew unions said that they have not agreed to any cut in PLI or allowances.” We are still in discussion with CMD and no conclusion has yet been arrived at,” a spokesperson said.
Aircraft delivery
The board also examined various other steps to reduce debt including cancelling the delivery of six Boeing 777 aircraft.
“Air India has sent the letter seeking cancellation of some Boeing aircraft. But cancelling the order is not an easy option as both parties have recourse to legal options,” sources said.
“The airline may have to pay huge default charges if it decides to exercise the option. Both the parties will sit across the table and negotiate,” sources said. The airline is also said to be seeking about $800 million for the delay in delivery of Boeing 787.
Air India, which has ordered 27 Boeing 787 as part of the 68 aircraft deal, was to receive the first aircraft September last year with one each coming till December. The last delivery was scheduled for October 2011.
Meanwhile, the airline on Thursday sent out an internal communiqué intended for those officers/executives in the grade of deputy general manager or above to seek an exit interview with the chairman and managing director, director concerned and the head of the department, if the employees desire to take voluntary retirement or resign from the company.
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