IndiGo reverses plan to cut salaries of employees, drops March decision

IndiGo is the best positioned airline to withstand the crisis created by lockdown to contain the coronavirus.

IndiGo, the country’s largest airline, on Thursday reversed its decision to cut salaries of employees, saying that only senior management executives would see a cut in pay.
 

“In deference to government wishes of not reducing pay during the lockdown, we have decided not to implement the previously announced pay cuts during the month of April. Except members of executive committee and senior vice-president and above, all of you can expect your April salary to be paid on time without cuts,” Ronojoy Dutta, IndiGo chief executive officer, wrote to employees.
 

Executive committee consists of CEO, chief operating officer, chief financial officer, human resources head and president of the company.
 

On March 19, IndiGo, which has 47 per cent market share in India, announced steep pay cuts for employees across board, including pilots and crews, as Dutta said the survival of the industry was at stake.
 

According to that plan, eight senior vice-presidents were to take a 20 per cent cut, while vice-presidents and pilots would see a reduction of 10 per cent in their salaries. The pay cut for senior management stays.

Prime Minister Narendra Modi had earlier urged industry captains not to cut salaries or fire employees during the nationwide lockdown. His message was followed by an advisory from the Ministry of Labour reiterating the same.
 

But despite that, companies have been forced to do salary cut, send employees on leave without pay revenue have come to a standstill with planes being grounded. However, fixed costs like lease rentals and salary increased. The condition was exacerbated as government forced airlines to stop forward bookings, squeezing one last source of revenue.
 

IndiGo’s peers like Wadia-group owned GoAir sent 90 per cent of employees on leave without pay for the entire lockdown period even after announcing an average 20 per cent pay cut.

SpiceJet sent a large section of cabin crew on leave without pay for three months and deducted salaries by 30 per cent. “A large part of our employees are on leave without pay,” Singh recently said.
 

Analysts say, with its large cash buffer, IndiGo is the best positioned to withstand the crisis. “IndiGo’s sufficient cash buffer of Rs 9,400 crore as of December 2019 should be enough to weather this storm, though other airlines will need external support in the form of interest payment moratoriums and lower taxation on crude and other imports,” Analysts at Kotak Securities said in a recent report.