Giving wings: Tatas to offer ESOPs to Air India staff to boost productivity

Air India's rivals IndiGo and SpiceJet offer ESOPs to their employees

In a bid to incentivise its staff and improve their performance, Air India may soon offer them employee stock options (ESOPs). The erstwhile national carrier, which was acquired by the salt-to-steel conglomerate Tata Group last year, will be the second company in the Group to have an ESOP policy.

Tata Motors is the other Group company with an ESOP policy, which was implemented in 2018. Air India will also bring in a key performance indicator for its employees — a benchmark to be used to judge their performance.

Sources said that the airline’s board will soon clear a comprehensive ESOP policy which will outline the number of stocks and the price at which they will be granted to employees.

“As part of the share purchase agreement, the Tata Group has agreed to give 3 per cent of Air India's equity shares to the permanent employees of the company. The board will soon pass a resolution to this effect. It will give employees a sense of ownership in the company, whereby the performance of the company will also impact their own compensation,” a person aware of the development said.

However, a Tata Sons spokesperson did not respond to queries on the subject.

Air India’s competitors, IndiGo and SpiceJet, also have ESOP policies in place. IndiGo allotted shares to its top management in its early days, and most of them became millionaires when the airline listed on the stock exchanges in 2015 at a price of Rs 765 a share.

Akasa, the new Indian airline backed by billionaire investor Rakesh Jhunjhunwala, is also offering stock options to attract staff.

“ESOPs are normally used for attracting and retaining talent. The Tatas are likely using ESOPs to improve productivity in a company which has been loss-making,” said Rituparna Chakraborty, co-founder of staffing firm TeamLease Services, adding that there is a wide mismatch between the demand and supply of talent in aviation.

“As travel picks up again, this gap will only widen. In such a scenario, it is prudent for every aviation entity to retain its talent,” she said.

The Tata Group has already started taking steps to overhaul Air India’s human resources. 

Suresh Dutt Tripathi, former vice-president, human resources, at Tata Steel, has been inducted as chief human resources officer, Air India.

After partially restoring the salaries of employees, the Group has also announced a new medical insurance scheme, which will come into effect from 15 May. The sum insured provided would be Rs 7.5 lakh per annum per family. Moreover, Air India has opened up a direct communication channel for its 7,000-odd employees, so that employees can reach out to the management to sort out their issues.

“The Tata Group has brought in human resources experts from other Group companies and have formed a cell where employee issues can be addressed. From now on, Air India will also have periodic town halls where employees will have the opportunity to ask questions and engage directly with CXO-level executives. This practice was not there in the company earlier,” said another person in the know.