Ahead of privatisation, Air India mulls massive staff layoff with voluntary retirement provision

Air India is drawing up a proposal to offer voluntary buyouts to just over a third of its 40,000 employees as the carrier slashes cost ahead of a 2018 sale.

Published: 18th July 2017 03:44 PM  |   Last Updated: 18th July 2017 04:32 PM   |  A+A-

The Air India logo is seen on the facade of its office building in Mumbai, India, July 7, 2017. REUTERS/Danish Siddiqui

By Reuters

NEW DELHI: Air India is drawing up a proposal to offer voluntary buyouts to just over a third of its 40,000 employees, a senior company official said, one of the largest such offers in India's state sector, as the carrier slashes cost ahead of a 2018 sale.

The official, who could not be named as the plans are not public, said the state-owned airline had also put fleet expansion on hold, scrapping a proposal to lease eight Boeing 787 wide-body aircraft. Air India's board approved the proposal in April but nothing further had been done.

India's flag carrier is on the block after Prime Minister Narendra Modi's cabinet last month approved plans to privatise the loss-making airline - selling part or all of the company and ending decades of state support.

Founded in the 1930s and known to generations of Indians for its Maharajah mascot, Air India has a complex fleet, too many staff relative to its peers and $8.5 billion in debt. Since 2012, New Delhi has injected $3.6 billion to keep it afloat.

An official in Modi's office said the leader, under pressure to cut spending and boost basic infrastructures like ports and roads, is in "no mood" to provide fresh monetary assistance to any loss-making public sector company.

The official said that top bureaucrats in the civil aviation ministry and at Air India had been asked to present a report on how a Voluntary Retirement Scheme (VRS) could be offered to about 15,000 of Air India's 40,000 staffers, including contractors. "Nothing has been finalised but our aim is to make the strategic sale as simple as we can," said a second top official in New Delhi, involved in the airline's daily operations, adding that any fresh investments would be put on hold.

Previous attempts to offload the airline have failed mainly because of the scale and complexity of problems at Air India, as well as its influential unions.

If Modi can pull the privatisation off, it will buttress his credentials as a reformer brave enough to wade into some of the country's most intractable problems.


In its heyday, Air India boasted of a talent pool that newly founded airlines dipped into.

The government will, however, need to convince seven trade unions to accept the plan to make the company attractive to potential buyers, including buyouts and other efforts to slash costs. Their initial response was not positive.

"The government will propose a VRS scheme and we will throw their proposal in the dustbin," said J.B. Kadian, leader of a union that represents 8,000 non-technical staff of Air India.

Kadian said a joint forum of unions representing Air India employees will launch "an agitation" in August if the government pursues its plans to privatise the national carrier.

A committee of five senior federal ministers, led by Finance Minister Arun Jaitley, is expected to meet this month and begin ironing out the finer details of the privatisation plan.

In the meantime, Civil Aviation Minister Ashok Gajapathi Raju said he wants Air India to begin cutting at all levels.

Earlier this month, the airline decided to stop serving non-vegetarian meals in the economy class on domestic flights, in a bid to save up to 100 million rupees ($1.6 million) over 10 months.

The action provoked uproar on social media and was belittled by aviation experts, who argue Air India management needs a massive structural overhaul, tackling thornier issues like fleet and staff, not meals.

The airline is also working to reduce the time its planes are not flying and launching direct flights to new international destinations. In July, Air India started a direct flight to Washington. It will start flying to Stockholm, Copenhagen and Los Angeles later this year.

"Keeping planes in the hangar makes no sense when Air India is trying to find new sources of income. We should optimize the use of all possible resources," Raju said. "The idea is to present a robust company to potential buyers," the minister said.


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp