Air India gets GoM green signal for voluntary retirement scheme

Decision taken in GoM meeting held on October 28,would be sent to the Cabinet for its final approval.

Realising that a turnaround of Air India was not possible without cutting its Rs 3,600 crore annual wage bill,a group of ministers (GoM) chaired by Pranab Mukherjee has asked the airline to offer an attractive voluntary retirement scheme (VRS) that can be part-funded by the government.

While the exact contours of voluntary retirement scheme (VRS) are yet to be worked out by the airline,the scheme would aim at taking at least 4,000 staff off company rolls,an airline executive present at the GoM meeting told The Indian Express. The decision taken in the GoM meeting held on October 28,would be sent to the Cabinet for its final approval.

In line with the group of officers recommendations on the proposed turnaround plan of the airline,the Group of Ministers has asked the airline to formulate a Voluntary Retirement Scheme (VRS). The government has assured us,if necessary,it will subsidise the VRS package through equity infusion, said the executive. While no concrete estimates have been drawn,a former executive director said a golden handshake could cost up to Rs 400 crore. The GoM,constituted to monitor the airlines turnaround,has linked governments bailout to various performance milestones which includes cutting down on staff costs.

Air India,formed after merger of two national airlines erstwhile Indian Airlines and Air India has over 36,000 permanent employees and 121 aircraft. We want to bring down the employees per aircraft ratio to industry standards of 100-150 per aircraft, said another official. The airline has been slammed for having a hugely bloated aircraft to employees ratio,which indicates that the company has more than required staff per aircraft.

Its earlier attempts at introducing VRS failed miserably as less than 1 per cent of its total workforce applied for the same. The VRS floated on previous occasions were not financially attractive at all. It computed the total VRS package taking into account only the Provident Fund contribution apart from salary for the remaining period. Productivity-linked Incentives,which form up to 80 per cent of total pay packet were left out, said the executive director quoted earlier.

Air Indias annual wage bill stands at nearly Rs 3,600 crore,which was to be brought down by at least 40 per cent as per its original turnaround plan. The airlines first attempt in September 2009 of slashing the wage bill by reducing perks up to 50 per cent led to industrial unrest as a pilots union declared an illegal strike,disrupting operations for nearly a week and causing cash loss of nearly Rs 80 crore. The airline,which has been struggling to contain its staff costs riding on back of generous wage agreements reached with their unions in the past,hopes to trim its workforce by deploying nearly half of them in its proposed two new subsidiaries Maintenance,Repair and Overhaul and ground handling by next year.