COVID-19: With Planes Grounded, IndiGo, GoAir Pilots Take Pay-cut

COVID-19: While IndiGo has announced a 25% pay-cut, GoAir has sent its employees on a leave without pay.

Updated24 Mar 2020, 01:50 PM IST
Business
4 min read

The global onslaught of COVID-19 has cast a shadow on the future of the aviation industry with airlines both at home and abroad announcing pay-cuts and partially suspending services amid mass-scale travel ban in major aviation sectors. The situation for airlines has further turned grim after the Centre’s move to ban all domestic flights in the country from 25 March.

Faced with a sharp dip in air traffic, IndiGo – India’s largest and wealthiest private carrier – prior to the suspension of all domestic flight operations said it will bring into effect a salary-cut of up to 25 percent for its staff.

According to a report in The Economic Times, the no-frills carrier’s CEO Ronojoy Dutta in an e-mail said that senior vice presidents and other executives would face a pay-cut of 20 percent from 1 April, while vice presidents and pilots would be paid 15 percent lesser.

According to the report, while cabin crews employed by the airline would face a five to ten percent pay-cut, Dutta himself has said he would take 25 percent lesser. Aware of how a pay-cut can impact the lives of employees, Dutta, in the letter stated that ‘it is impossible for our company to fly through this economic storm without all of us making some sacrifices.”

‘Ban Important, But Airlines & Govt Must Work Together’

Reacting to the ban on domestic flights, aviation expert Jindendra Bhargava said that although airlines, like many other industries, will suffer, the larger point here is to break the chain of transmission.

“No lockdown can be successful if flights are operational. We can’t overlook the major objective, which is containing the coronavirus,” he said.

But expecting airlines to pay full salaries is not advisable as it will only burden its already strained finances. However, he added that “the government and the airlines must come together to ensure that employees have enough to sustain themselves.”

He further added that the government must ensure that airlines deposit provident funds of employees and that there should absolutely be no compromise on it.

Maharaja’s Endless Woes

State career Air India, too, has temporarily suspended or slashed allowances of executive pilots, cabin crew and other officers, reported LiveMint.

According to the report, Air India has suspended entertainment allowance for executive pilots, slashed layover allowance for cabin crew, while reducing fuel allowance for officers.

A senior Air India pilot familiar with the matter said that the “amount may look small on paper, but for a pilot of his pay scale, it often means a cut of up to Rs 70,000.”

The crisis in the aviation sector has cast serious doubts on the government’s attempt trying to sell-off Air India. According to a CAPA report, the last date for submitting expressions of interest have been delayed by six weeks till 30 April, which means that the government now needs to set aside $ 300-400 million to maintain the state career in its present state, till the sale is complete. 

GoAir’s Problems

Following in the footsteps of IndiGo, GoAir, too, has announced up to 50 percent pay for its top-level employees and has sent its employees on rotational leave without pay, reported Moneycontrol.com. The move comes weeks after the airline, owned by the Wadia Group, decided to suspend all international operations and began termination of its expat pilots.

According to a report in Business Standard, 70 expat pilots signed on by the airline in August 2019 have been asked to leave the airline and go back to their respective home countries. Meanwhile, the same report says that GoAir is presently looking at cutting 35 percent of its staff across departments and up to 50 percent in support services.

How long are these measures expected to last? According to Moneycontrol.com, CEO Vinay Dubey in a message to GoAir employees said these measures were ‘temporary’.

GoAir clocked a market share of 9.8 percent in January 2020, and, prior to suspension of all domestic operations, had already cut its fleet size from 54 to 38. 

Turbulence for Air Asia India?

Air Asia India, a joint venture between Malaysia’s Air Asia Berhad and Tata Sons, has reportedly halted all expansion plans and had told its staff that they wouldn’t get a bonus this year.

According to The Economic Times, Air Asia India presently has 30 aircraft and was hoping to ramp by to 40 by May. However, these expansion plans have been put on hold due to the coronavirus pandemic.

However, according to a Business Standard report, the Tatas have been unhappy with the partnership and have reportedly told Air Asia multiple times that they may no longer be able to pump in more money.

Both SpiceJet and Vistara had suspended international operations to match a reduced demand and negative booking – a situation where flight cancellations are higher than fresh bookings.

Government’s Rescue Plan

According to future estimates by the CAPA-Centre for Aviation, Indian carriers may lose upto $600 million in April-June. The MoCA says that out of total of 633 aircraft, airlines in India may be forced to operate only 200 – grounding 66 percent of India’s cumulative fleet.

Reports say the Ministry of Civil Aviation is working on a relief package for domestic airlines, which will include a cut in taxes.

  • Two-month fuel credit from oil marketing companies.
  • Waiving landing and parking charges.
  • Waiver of charges on jet fuel like excise duty, VAT.
  • Soft loans from banks at an interest rate of 1-15 percent
  • Slashing of navigation charges by 50 percent

Since an aircraft makes losses from the moment it is grounded, the government should defer oil and parking costs, said Bhagrava.

Global Aviation Left Bleeding

As airlines at home are hit by the outbreak of COVID-19, those in the world have had to suffer as well. According to the Indian Air Transport Association (IATA), the global airline industry is expected to lose $113 as a consequence of travel restrictions across the globe.

  • British Airways pilots to take a 50 percent pay-cut in March & April.
  • Singapore International Airlines: Senior staff to take a 20 percent pay-cut as airline cuts capacity by 96 percent.
  • Emirates employees to take a 25-50 percent pay-cut. Capacity reduced, except for Emirates Cargo.

We'll get through this! Meanwhile, here's all you need to know about the Coronavirus outbreak to keep yourself safe, informed, and updated.

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Published: 23 Mar 2020, 03:35 PM IST

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