India's Jet Airways Slashes Salaries
After holding back Diwali bonus, India's largest private airline Jet Airways has now proposed to slash salaries of its top key executives by 25% in a bid to control costs. The decision has been taken by chairman Naresh Goyal at an internal meeting with employees at Hotel Renaissance, Powai, on Sunday night.
Sources familiar with the situation divulged that pilots and engineers earning more than Rs 10 lakh a month would have to take a pay cut of 20% whereas chief executives and operational heads would take a 25% pay cut. The company has also decided not to pay any allowance to trainee pilots, though pilots who come below the Rs 75,000 a month salary bracket have been kept out from the exercise.
After a five-hour-long meeting with the employees, Mr. Goyal is learnt to have communicated the decision to executives, pilots and aircraft maintenance engineers in separate meetings and sought their feedback. After that, Jet will announce its new salary structure in December.
ET, in its October 21 edition, had reported that the company was expected to go for a 25% salary cut. Its executive director Saroj Datta had said then: "We will do everything to reduce costs of the company. If necessary, this would also include salary cuts for the top management."
It was learnt that the engineers will get back to Mr. Goyal next week whereas a few Indian pilots ET spoke to refused to takethe pay cut citing reasons of disparity between Indian and foreign pilot salaries. Apart from salary cuts, on the trim list are perks which include hotel and entertainment allowance. The company would not pay for overtime to its pilots from next month.
There appears to be a big difference in the salaries of foreign and Indian pilots. A foreign pilot is paid a monthly salary of Rs 5 lakh plus accommodation allowance of Rs 2 lakh. Indian pilots, on the other hand, draw Rs 3.6 lakh a month.
Jet will save at least Rs 350 crore every month if it is able to implement the new salary structure, said an analyst. In 2007-08, Jet's salary bill had shot up to Rs 1,205 crore from Rs 938 crore in 2006-07. Its tier-I employees' take-home salaries are as high as Rs 10-15 lakh a month depending on the experience and positions. Of its 13,200 employees, around 2,000 earn more than Rs 1 lakh a month. These employees are mainly pilots and aircraft maintenance engineers.
Jet is also planning to rejig the salary structure of its reinstated cabin crew by shifting a major portion of their salary to the variable component. Also, the cabin crew is expected to accept a substantial reduction in their flying hours as Jet will reduce flight capacity by 30%.
In the meeting, Mr. Goyal said that the company was not in a position to pay VRS for the older staff, which it had announced earlier. Jet Airways had an outstanding of Rs 1,500 crore, of which Rs 321 crore was beyond credit limit. The Jet Airways stock slipped 1.03% to close at Rs 149.55 in a rising Mumbai market on Friday.