Air India and its mismanagement

Loss-making Air India decided to cut by 25 to 50 per cent a key salary incentive as part of a cost-cutting plan it needs to push through to win a government bailout.
The slash in the productivity-linked incentive (PLI) will affect close to 7,000 of the airline’s 31,000 employees, including pilots, cabin crew and executives.
The cuts, cleared by the state-owned airline’s board at its meeting here, are expected to take the carrier closer to its targeted annual savings of around Rs 800 crore.
The incentive costs the airline around Rs 1,400 crore each year. Analysts said a flat 50 per cent would have lowered the amount to Rs 700 crore. The airline’s accumulated losses were around Rs 7,200 crore on March 31 this year.
There was no reaction from the airline’s unions,weeks after Jet Airways pilots, protesting sackings over moves to form a union, went on mass sick leave. Although they resumed duty after a few days, the private airline is said to have taken a Rs 40-crore hit.
Air India said the incentive slash would apply to all officers, including the top management.(The cut will be 25 per cent for those getting an incentive of Rs 10,000 or less per month. It will be 50 per cent for those getting an incentive of Rs 2 lakh or more per month.
The cut will be 35 per cent on incentives of Rs 10,001 to Rs 25,000, 40 per cent on Rs 25,001 to Rs 50,000 and 45 per cent on Rs 50,001 to Rs 2 lakh).

After that it gets strong opposition from employee unions.
“The Air India board accepted the recommendation of the committee, headed by Anup Srivastava, director (personnel), which had been asked to review the incentive,” the statement said.
Finance minister Pranab Mukherjee had recently reviewed the airline’s turnaround strategy. But he was believed to have indicated that any help would only come after cost cutting. The airline wants a Rs 5,000-crore bailout.
How mismanagement at the top level and government led to airlines downfall.Cant say- its financial troubles will be over !!.

Air India spreads its wings with incentives.(Daily News & Analysis)
After strike, AI swoops in with irresistible fares.(Times of India)
Air India pilots call off agitation.

Flights are back to normal schdule & pilots are back at the cockpit but that was'nt the real story.

Behind this the story of deep financial crises & missed oppurtunities lies. The strike has left the airline poorer by about Rs 100 crore. The merger facilitated by global consulting firm Accenture was carried out to achieve focused objectives-cutting cost, achieving economies of scale& creating a big airline with a single large network and footprint across India and world, and eventually make profits.But didnt workout;

There is a view that the merger was thrust upon the airlines that weren’t ready for it. If employees are consulted for pay cuts, they might as well have been consulted for the merger... agree or not..?

So, just how can Air India turn around? “The management has to be professionalised and the airline privatised.

NITIKA DARMOLI

PGDM SECT-B, 3rd sem.