Wednesday, December 7, 2011

Cash-strapped Air India thinks of VRS scheme

With only 17 per cent market share, state-run carrier plans golden handshake for employees

According to a source, the airline management is “giving finishing touches” to the proposed VRS scheme to make it attractive for employees who wish to opt for it.

“Being a public sector enterprise, not too many people want to opt for VRS. But given the condition of the airline, and if a handsome scheme is offered, many employees will opt for it,” the source, who did not wish to be identified, said.
Earlier in 2004-05, a VRS scheme aimed at reducing the work force was offered to employees when Air India and Indian Airlines were two separate entities, but only a handful of them opted for it.
“Before the merger (in March 2007) the situation was far too different. Both airlines were doing moderately well, resentment was low and employees had few options. But today, the situation is just opposite with employees willing to leave—to facilitate their smooth exit, the airline will have to offer a golden handshake,” the source added.
Despite a reasonable employee-aircraft ratio, (Air India's employee-aircraft ratio is 263 vis-a-vis around 180 of British Airways, 406 of Air Lanka, 285 of Air France-KLM, 521 of PIA and 318 of Thai Airways) the airline has not been able to maintain its lead in the market leading to losses and decreased market share. With 17 per cent market share, Air India is in third position and way behind private carrier Jet Airways and low-cost carrier Indigo.
About 4,000 Air India employees will retire in the next five years easing the airline’s salary burden, which is to the tune of Rs 3,200 crore per annum.
On being asked how does the financially cripple airline propose to offer VRS to its employees, the source said, “With expenses being reined in, increased aircraft utilisation and equity infusion as promised by the government—Rs 30,000 crore in the next ten years—the airline will be in a position to offer VRS to interested employees. The fine contours of the VRS will be worked out soon. The estimated expense is yet to be ascertained as number of employees who could be interested in the scheme is not known.”
Employees and union leaders, however, said that “they have not received any official communication”. “We have only heard about a proposed VRS. We will have to wait and watch,” they said.

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