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AI may go for 15% pay cut to gain govt bailout
Published on 3 Mar. 2010 11:55 PM IST
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Air India, the struggling national carrier, plans a 15% wage reduction for its 30,000 staff, as part of its cost-cutting strategy to gain an equity bailout from the government, said two people familiar with the development. This would be the airlines’ second attempt to cut wages after it move to cut productivity-linked incentive led to strike by pilots last year, stated Economic Times. The board committee, which has recommended the wage cut, estimated the company could save Rs 600 crore. These savings would also include a cut in retirement and other employee benefits. It may also cut staff, if a consensus evolves, said the people. The management targets two months to implement these measures. Arvind Jadhav, chairman and managing director of Air India declined to comment. Air India, has been sinking for the past many years, as rivals chipped away customers from it and the previous oil price surge left it bleeding with losses of more than Rs 5,000 crore and a debt of Rs 16,000 crore. While its state-ownership kept it afloat, its operations became inefficient. The government, to avoid labour unrest, has agreed to bail it out, but has laid out conditions such as cost-cuts. Air India, formally known as National Aviation Company of India (NACIL), had sought Rs 10,000 crore as equity and Rs 10,000-crore interest free loans over the next three years. One of the options in cutting wages could be adding the productivity-linked incentive (PLI) to the basic pay, instead of scrapping it, said an official. As part of the bailout, Air India has so far got Rs 375 crore of equity infusion, of which Rs 75 crore has been paid to Airports Authority of India (AAI) towards pending dues. The second tranche of Rs 400 crore will be disbursed this month. Finance minister Pranab Mukherjee has set aside Rs 1,200 crore for the next fiscal, but that is linked to a savings of Rs 1,911 crore, failing which it wouldn’t get those funds. It has the highest employee to aircraft ratio of 203 to one.

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