The government’s plan to restructure Air India, the loss-making state-owned airline, includes a proposal to rework the troubled productivity-linked incentive (PLI) scheme, which accounts for over 45 per cent of the company’s Rs 3,000 crore wage bill.
The scheme has been at the core of the airline’s inflated costs, so much so that the airline set up a company last month to examine ways of reducing the wage bill by Rs 500 crore.
The airline is suffering losses of over Rs 5,000 crore and the management has been given 30 days to come up with a viable revival plan.
| REFUELLING AIR INDIA |
| * Restructure the productivity-linked incentive scheme which accounts for over 45% of the company’s wage bill |
| * Extend retirement tenure of pilots for two years; not contract extension for expatriate pilots |
| * Air India-SATS joint venture for ground-handling to start operations in September |
| * Ask for an extension of loan payment by six months from lenders n Defer delivery of new aircraft |
The plan also envisages deferring aircraft delivery, kick-starting operations of the joint venture for ground-handling operations from September, and requesting a six-month repayment deferral from lenders. Air India currently has debt of Rs 15,000 crore on its books.
Proposals are also being discussed on extending the retirement age of pilots by two years to 60, instead of extending the contracts of expatriate pilots. Air India also has 124 expatriate pilots who earn 40 per cent more than their Indian counterparts — with salaries of around Rs 10 lakh a month and contracts that run to July 31, 2010.
The productivity-linked incentive or PLI scheme, however, remains the major problem. “At the moment, the PLI in many cases is huge, sometimes many times more than the salary and is not always related to performance. We need to restructure the PLI and save costs and make it directly related to performance,” said government sources involved in the restructuring of the airline.
For instance, technicians get a salary of around Rs 50,000 per month and a monthly PLI income of Rs 1.3 lakh. The PLI in this case is linked to criteria such as the number of aircraft services, among others.
At the lowest category of employees, the PLI constitutes 20 to 30 per cent of overall salary. For instance, a superintendent with a salary of around Rs 25,000 a month gets a monthly PLI of Rs 9,000 to 10,000.
At the lowest level of a helper, with a salary of Rs 15,000 a month, the PLI is around Rs 2,000.
The issue, however, is still to be discussed with Air India’s six-odd unions, some of which appear favourably inclined. “We are ready to look at restructuring of PLI. The problem of mismatch of PLI, which is sometimes three times the salary, is at the higher levels, like with engineers and technicians, not with most of our members,” said Dinakar Shetty, president of the Air Corporation Employees Union, which claims to be the largest union, representing 80 per cent of the employees.
The management of Air India, which was formed through the merger of domestic airline Indian Airlines and flagship carrier Air-India in 2007, admits that restructuring PLI for the airline’s 31,000 employees won’t be easy.
The PLI is linked to productivity and not with profitability, so we have to see how the government is thinking of reworking them,” said a senior Air India executive.
Meanwhile, government sources said that the joint venture between Singapore Airport Terminal Services Ltd and Air India (in which it has 51 per cent stake), which was formed last year, for ground-handling would be operational from September and the process of registration of the company is on.
Some Air India staff will be transferred to this company , though the numbers have not been worked out yet, the sources said.
The joint venture has been the focus of controversy with many top Air India executives opposing its formation. They have contended that that AI now has to pay a substantial amount to the new company for services rendered which is much larger than the profits it would make as a majority holder in the company.
On aircaft delivery, the government official said: “We have not come to the numbers but there will surely be deferrement of delivery of the new aircaft.”
The company has already taken delivery of 48 aircaft out of the 111 it had ordered.
