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Friday, October 17, 2008
 

Air India seeks to cut costs by offering unpaid leave to workers


Air India, the state-owned carrier, yesterday admitted it was seeking to pare its workforce by up to 50 per cent, as state oil officials accused India's two biggest private airlines of defaulting on $21m in jet fuel bills.

In the latest reflection of the gravity of the crisis facing India's airline industry, Raghu Menon, chairman and managing director of Air India, said the company would allow 15,000 of its workers to apply to go on unpaid leave for a period of three to five years.

The carrier, which has about 145 aircraft, has almost 33,000 employees, giving it one of the highest staff-to-aircraft ratios of any airline. But the carrier is trying to slash its wage bill, as it faces an estimated $800m in losses in the current financial year. Of its 33,000 employees, about 18,000 are involved in essential operational areas, while another 15,000 hold office jobs.

Jet Airways, India's biggest and most established private carrier, this week began cutting 1,900 of its 13,000 workers to "save the company" in the face of declining passenger traffic and rising costs.

However, sacking workers from a state enterprise is a tougher proposition, given politicians' reluctance to tangle with powerful state labour unions.

Kapil Kaul, chief executive for the Centre for Asia Pacific Aviation, said: "The question of lay-offs in Air India is wishful thinking." He estimated that the state carrier is 50 per cent over-staffed.

Air India said no employees would be laid off or forced to go on leave.

"The company is looking at many means of cost-cutting, including a scheme whereby employees of the company - if they so choose to do so, on a purely voluntary basis - can avail of three to five years' leave," it said.

But Air India admitted that only a handful of its employees were likely to take up the invitation.

Air India's admission of its desire to cut staff comes amid tension in the government over how to help ailing air carriers, which are reeling from declining passenger traffic and rising costs.

Private carriers have called for a reduction in heavy taxes in jet fuel to help them survive the squeeze of declining traffic and higher costs. But Murli Deora, India's petroleum minister, said carriers should first clear their outstanding bills to state-owned oil companies. Mr Deora said Jet and Kingfisher, India's two biggest private carriers, owe a combined $21m to Indian Oil Corp.

Source: ft.com

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