Air India Pilot Strike Enters Eighth Day, Hindering Turnaround

Air India Ltd. canceled flights for an eighth day because of a pilots strike, hindering the state-owned carrier’s efforts to pare costs and win back passengers following at least four straight annual losses.

The airline will only fly 38 of its 155 scheduled domestic flights today because of the pay dispute involving roughly 760 pilots, said Kamaljeet Rattan, a spokesman. The Delhi High Court yesterday issued contempt notices against nine union leaders after they ignored a previous order to return to work.

The Mumbai-based airline has canceled more than 1,000 flights because of the dispute, which is costing it 200 million rupees ($4.5 million) a day in lost sales. The stoppages may also disrupt the carrier’s bid to return to profit by 2015 as it struggles to combine different units following a 2007 merger and loses market share to Jet Airways (India) Ltd. and IndiGo.

“Air India needs a magician to solve its problems,” said Rishikesha Krishnan, a professor of corporate strategy at the Indian Institute of Management, Bangalore, who has written papers about India’s aviation industry. “It seems very difficult to achieve any sort of operational discipline under public ownership.”

The striking pilots previously worked for Indian Airlines, the carrier Air India combined with about four years ago. They are seeking raises so that their salaries will match those of Air India crew, the union said in an e-mailed statement on April 27. The dispute hasn’t affected long-haul flights to the U.S., Europe and the Middle East.

Debt Talks

The carrier, which had 384 billion rupees of secured and unsecured loans as of March 2010, is also in talks with about 20 banks on restructuring debt, according to the April 8 statement. Chairman and Managing Director Arvind Jadhav plans to cut 40 billion rupees a year from operating costs as well, it said.

“It does make the turnaround more difficult,” said Binit Somaia, director at the Sydney-based Centre for Asia-Pacific Aviation. “Passengers will be reluctant to book tickets on Air India in future.”

The government has already pledged to give the carrier 12 billion rupees in the financial year started April 1, according to annual budget documents presented in parliament. The airline got 20 billion rupee of bailouts in the last two fiscal years.

The carrier will borrow about 2.8 billion rupees from banks for April salaries, Rattan said. The airline is withholding pay from the striking workers, he said.

“In the long run, this strike won’t affect the turnaround,” Rattan said.

The union leaders have until May 25 to respond to the court notice on why contempt of court proceedings should not be initiated against them, Rattan said, citing the ruling. The stoppages will continue, Vikram Yadav, an official at union Indian Commercial Pilots Association official, said yesterday.

No Job Losses

The airline has about 1,700 pilots among its 29,000-strong workforce. It had a fleet of 135 planes as of August 2010, with outstanding orders for 27 new Boeing Co. (BA) 787 Dreamliners. Jet has about 13,000 employees and 97 planes.

Air India’s then-Chairman Vasudevan Thulasidas assured workers that there would be no job losses following the 2007 merger, according to a company press release. The government combined the carriers to link Air India’s largely international services with Indian Airlines’ domestic-focused network.

Falling Share

Air India had a 14.9 percent market share on domestic routes in March, compared with a combined 19.2 percent share for the two state-owned carriers in the first quarter of 2007, according to the civil aviation ministry, which doesn’t give data for international routes. The airline also only filled 61.1 percent of available seats in March, the lowest load factor among Indian carriers.

Jet had the biggest market share that month at 25.4 percent. IndiGo, which is less than five-years old, had 19.5 percent. The discount carrier is planning to begin overseas flights from August after placing a provisional order for 180 Airbus SAS A320 planes in January, the world’s largest commercial-aircraft deal.

Air India is adding new planes in a bid to win back passengers and expand its network as the nation’s economic growth stokes travel demand. It will get the first of the on- order Boeing 787s in the fourth quarter, Dinesh Keskar, head of the planemaker’s India commercial-aircraft operations, said in Bangalore on February 9.

The start of deliveries will be about three years late because of production delays. In August, Air India said it would seek $840 million in compensation.

In January, the carrier sought bids to lease as many as 40 Airbus and Bombardier Inc. aircraft.

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net.

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

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