Airlines cut salaries, renegotiate contracts to tide over Covid crisis

Airlines are slashing salaries and renegotiating vendor contracts as drastic fall in passengers has hurt revenue.

Go First has cut staff salaries by around 16 per cent while Indigo and Spicejet are enforcing a leave-without-pay (LWP) policy and pay-by-the-hour structure, respectively, to prune expenses.

Vistara, which reversed pay cuts for junior staff, including managers, and cabin crew in March, is not touching employee salaries at the moment and instead focusing on vendor renegotiation and maximising cargo revenue. An Air India executive said efforts are on to pay salaries by June 7 or 8. Daily passenger traffic fell from the peak of around 300,000 in February to less than 40,000 towards the end of May on the back of statewide lockdowns and mandatory RTPCR testing. This resulted in airlines grounding planes and cancelling fights.

Although the wage bill accounts for only around 10-15 per cent of expenses for no-frill airlines, the management is looking at various ways to keep expenses in check.

“With a load factor of around 40 per cent, airlines can’t recover costs. Yields, too, have been impacted. Loads need to increase at least to 6570 per cent for a flight to break even,” an executive of a lowcost airline said.

Go First had implemented an extensive LWP scheme last year, and till recently, around 700-800 staff members were impacted due to it. It has reversed the LWP policy but effected a fresh pay cut of around 16 per cent from May. The airline management, however, hopes that demand will recover from later this month and help it earn better revenue.

“This is the second pay cut in two years, and this time, the management has cut our basic salary. Typically, a larger portion of pilot salaries would constitute flying allowances. But now, pilot work hours’ have drastically come down due to a drop in the number of flights. A few months ago, I would get to fly 40-45 hours per month and now it has come down to less than 10 hours,” said a Go First pilot.

Indigo has reintroduced its LWP policy from June. "The second wave has been difficult for all of us and also resulted in reduction of passenger load. As a result, our commercial schedule had to be curtailed accordingly. Unfortunately, due to the reduced capacity, we will have to institute an LWP programme for all employees, which will range from 1.5 to four days, depending on the employee group (except for band A & B). All pilots would undertake three days of LWP for the next three months effective June 1," Indigo wrote to employees.

Spicejet is reverting to the structure of paying employees by hours worked and also announced a deferral of 35 per cent of salary to the majority of its employees.

Last month, also, the airline had deferred payment of up to 50 per cent salary for most employees, citing Covid-19 business disruption.

“Our focus is to continue working towards achieving and maintaining a lean cost structure while exploring newer avenues to supplement our earnings. To this end, we have also been leveraging opportunities, such as commercial cargo and charter flights, and also introduced other ancillary services in our effort to generate additional revenue,” Vistara said in a statement.