MUMBAI: Bracing against coronavirus impact, Indian carriers, like their global counterparts have begun cost-cutting measures starting with salary reductions. On Thursday, IndiGO, India’s largest carrier in terms of market share announced across the board cuts in salary.
A day earlier, debt-ridden national carrier Air India — one of the worst hit in the country by COVID-19 outbreak — had announced cost-cutting measures which included cancelling or reducing certain allowances it pays to its executive pilots, cabin crew and officers. GoAir had set the tone early this week with the introduction of mandatory unpaid leaves in rotation for its employees.
In a letter sent to IndiGo employees on Thursday, CEO Rono Dutta said that he was personally taking a 25% pay cut. “SVPs and above are taking 20%, VPs and cockpit crew are taking a 15% pay cut, AVPs, Bands D along with cabin crew will take 10% and Band Cs 5%. We know how hard it is for families to take a cut in take home pay. But unfortunately, it is impossible for our company to fly through this economic storm without all of us making some sacrifices,” said the letter.
The airline further said it was “instituting pay cuts for all employees excluding Bands A and B, starting April 1, 2020.”
“I am afraid that the impact of the coronavirus on the aviation industry has been particularly severe. Governments across the globe have issued travel advisories which have resulted in a virtual shutdown of all our international flights. Domestic bookings too are down around 20% and it is not clear that the situation will not get worse before it gets better,” Dutta said.
“With the precipitous drop in revenues the very survival of the airline industry is now at stake. We have to pay careful attention to our cash flow so that we do not run out of cash. Unfortunately, this means that we have to reduce our costs in line with the drop in revenues,” his letter added.
Air India, on the other hand has imposed a 30-40% cut in cabin crew members’ allowance, payable to them when they have a layover between flights.
“All cabin crew members (permanent and contractual) rostered for flying duties from April 1, 2020 will receive revised layover allowance of $100 for 30 hours and thereafter $4 for every additional hour. In case of ultra long haul flights, like Mumbai-Newark for instance, it will be $140 for 30 hours and $6 for every additional hour in excess of 30 hours,” said a letter issued by S K Singh, Air India executive director (finance) on Tuesday. The move has not gone down well with cabin crew unions who took up the matter with higher-ups.
The allowance withdrawn with immediate effect was “Entertainment Allowance” paid to executive pilots. Air India pays about $200-250 per month, depending on their designation, as entertainment allowance to over 100 executive pilots, said a source. Apart from this fuel reimbursement limits for all officers has been reduced by 10 % from April 1, initially for a period of six months, the letter said.
“Keeping in view the financial position of the company in the wake of recent global development, a need is felt to take steps to contain costs as far as possible,” said the letter, adding that airlines all over the world are taking step in this regard with a few having taken very aggressive actions.
On Tuesday, GoAir became the first Indian carrier to announce cost cutting measures to check COVID impact. The airline initiated a short term rotational leave without pay program. It said that this “will not only help the company counter the short term reduction in capacity, but will also ensure that a cross section of our employees stay away from the workplace for a month at a time to ensure business continuity.”
“Knowing that this will put a financial burden on the affected employees and having studied what companies have done in other countries to help guide our plans, this decision was not taken lightly,” the airline added.