IndiGo To Go First Face A Tough Choice: Higher Costs Vs Employee Exodus

Indian airlines are facing a dilemma: either give in to the growing demand for higher wages by employees and let expenses rise, or hold the fort a while longer to control costs at the risk of losing a chunk of employees.

The clamour to reinstate or increase wages has turned louder with employees at certain airlines resorting to mass leaves.

One such incident at the industry leader IndiGo (Interglobe Aviation Ltd.) led to 55% of the airline's flights getting delayed in a single day. Many of these workers are still working at salaries which were reduced after the pandemic hit, according to multiple people BQ Prime spoke to with knowledge of the matter.

Anger simmers even as airlines have yet to fully recover from the pandemic that hit air travel. While carriers have managed to stay afloat, IndiGo's parent InterGlobe Aviation and SpiceJet, together accounting for more than 67% market share, are still reporting losses. And they will be wary of increasing expenses amid inflationary headwinds and a depreciating rupee. But employees, too, have suffered as the sector was among the worst hit by Covid-19.

"When the salaries were reduced, employees were fine with it because many people were laid off at that time and workers were just happy that they still have a job,” said Sumeet Suseelan, group chairman of International Institute of Aviation. Now that the sector has bounced back, the employees’ salaries should be reinstated, he said.

IndiGo was not alone in facing a backlash. The no-frills carrier Go First saw something similar.

In an emailed response to BQ Prime, the airline, however, said there has been no general protest but there were “a few technicians who were absent for 2-3 days”. The employees were misguided and the people who were absent have assured the company they will resume work within one or two days, it said.

The Wadia Group-owned company said that it has reinstated employees from “Leave without pay” to normal working conditions and brought salaries to pre-Covid-19 levels since August and September.

A SpiceJet Ltd. spokesperson said the salary of technicians and cabin crew has been reinstated to pre-Covid levels. Pilots' pay is still being raised regularly to reach contractual levels, the spokesperson said.

IndiGo did not respond to emailed questions.

Even before the pandemic, India’s aviation market was one of the most competitive, with carriers finding it challenging to make profits or to even stay afloat. Then Covid-19 froze travel for months.

Even as the industry struggled to recover, a rise in aviation turbine fuel prices and a depreciating rupee squeezed financials.

“The depreciating rupee will also have an impact on the airlines because expenses like MRO (maintenance, repair, overhaul) services are borne outside of India, which will have a higher impact on the financials now,” said Jagannarayan Padmanabhan, director at Crisil Ltd.

The price of ATF has also more than doubled from prior to the pandemic.

Some industry insiders said that adverse conditions shouldn’t stop the airlines from rolling back the salaries to what they were before the pay cuts.

While some of the airlines make profit and others don’t, they cannot pass on the pain to the employees who are there to work and not run the business, an office-bearer of the Indian Commercial Pilots' Association told BQ Prime on the condition of anonymity out of fears of backlash.

The overtime rates are cut and the Boeing 777-fleet is doing 90-95 hours, compared with 70-80 hours before the pandemic, the person said. Usually, when pilots fly for more than 70 hours in a month, they get additional compensation for it.

Flight operations have bounced back to pre-Covid level for some carriers.

On July 18, there were 5,145 domestic aircraft movements compared with an average of 5,781 in July 2019, according to data from the Centre for Aviation. As many as 893 international flights took off on that day compared with 1,181 flights in July 2019.

Among the airlines, IndiGo operated an average of 1,610 flights in May, nearly 16% higher than May 2019. Go First, AirAsia India and Vistara also operated higher flights in May this year.

Air India and SpiceJet, however, are still below pre-Covid levels in terms of flights operated in a single day.

As the Rakesh Jhunjhunwala-backed Akasa Air and Jet Airways prepare to start commercial operations, and with Air India also looking to scale up, there will be demand for professionals to fulfill various roles in the industry.

“Any new airline would want trained professionals for performing critical operations and they’ll get them at the existing airlines, which may increase the employee costs,” Crisil’s Padmanabhan said.

The fight for talent, however, is yet to reflect in offers.

According to an IndiGo cabin crew member, who spoke on the condition of anonymity, when she turned up for the Air India interview, she found out that the Tata Group-owned airline was offering just Rs 15,000 per month, as compared to the Rs 45,000 she was earning per month.

Air India didn't respond to BQ Prime's queries.

“The employees are the most vital element in the aviation industry, particularly in the licensed categories such as pilots and engineers,” said Harsh Vardhan, chairman of the New Delhi-based Starair Consulting and former head of Vayudoot, a now-defunct Indian regional carrier that was merged with Indian Airlines in the 1990s.

According to him, in six months, there will be serious jostling among airlines to attract more employees at higher salaries.