Uphill Battle
Staring at record losses, the travel and tourism sector is preparing a plan to take on coronavirus
Patu Keswani, the Chairman of Lemon Tree Hotels, recently decided not to take salary for three months. Other senior members of Keswani's A-team (such as vice presidents and managers) also took pay cuts of between 50 per cent and 65 per cent. When Business Today spoke to Keswani, his rationale was an eye opener. Just about 15 per cent staff in his hotel chain accounts for half the wage bill. “The key decision at the moment for managements is to take pay cuts instead of firing employees, and look for ways to cut fixed costs. Hotel chains can bring down their wage bill by 30-40 per cent without touching 85 per cent of the staff,” he says.
In the large universe of the travel and tourism sector, Lemon Tree is among the bigger names that have been affected by the coronavirus pandemic. As per industry body FAITH ( Federation of Associations in Indian Tourism & Hospitality), the travel and tourism sector is staring at losses of nearly ` 5 lakh crore, apart from five crore lay- offs, as a result of coronavirus, though these projections keep changing as the situation evolves.
Most large players are devising strategies – almost on a daily basis – to tide over the crisis. However, the way the crisis is unfolding is so unpredictable that even the best strategies can fail. According to the promoter of a leading hotel chain, it’s estimated that nearly 20 per cent travel and tourism companies, mostly in the informal sector, will not survive for more than a year.
So far, travel and tourism companies have resisted laying off employees. Most have announced salary cuts (or furlough in some cases like SpiceJet and GoAir). But the question is: how long can they continue to hang fire, especially since revenues have been badly hit due to global travel bans? Will airlines, hotel companies and travel agencies – the last two being highly unorganised – have to resort to firing employees in case the lockdown is extended repeatedly? Or is there a middle path?
The Balancing Act
Following Prime Minister Narendra Modi’s address to the nation on April 14 in which he asked employers to avoid cutting jobs, there have been no instances of layoffs so far except retrenchment of some expat pilots by Nusli Wadia- owned GoAir. Though airlines have started feeling the heat after Aviation Minister Hardeep Singh Puri asked them to discontinue bookings till further notice. There are speculations that domestic bookings may restart in June. This means a long waiting period for airlines.
Meanwhile, the impact of coronavirus has started to unfold on global carriers. For instance, Virgin Australia recently entered bankruptcy proceedings whereas cashstrapped Norwegian Air laid off 4,700 employees. British Airways has suspended its 30,000- strong workforce with 80 per cent salary cuts. The distress is spreading.
Back home, troubles are coming at a faster pace. GoAir asked its employees to take leave without pay in the third week of April. SpiceJet, too, sent some engineering staff on furlough. Prior to this, these airlines, along with IndiGo, Vistara and Air India, had announced salary cuts for some of their staff which were as high as 50 per cent in some cases. While salary cuts are almost inevitable, there’s a clear consensus in the industry that layoffs should be avoided at all costs, especially at mid and junior levels. Why?
One, these people don’t add much to the wage bill. Also, it’s going to be difficult to find trained people after the situation normalises. Mark Martin, founder of aviation consultancy Martin Consulting, says GoAir should not have laid off expat pilots as there’s shortage of senior pilots. “It’s a penny-wise, pound-foolish decision. Once business starts, it’s going to be employees’ market. These pilots are not missionaries. They know the demand- supply situation. They are likely to ask for 30 per cent salary hikes after this is over,” he says. In India, the acute