New Delhi, April 21: In a move that would discourage its employees, one of the major carriers in India, Jet Airways has decided to freeze annual salary hikes of its senior employees this financial year. This move is expected at the end of the April-March fiscal for at least a quarter. The salary freeze is applicable to all employees in manager grades M3 and above and will be effective from April 1, 2017. As India has become the third-largest domestic aviation market in the world, there is fierce competition among the various airlines like Indigo, SpiceJet, Air India, Vistara, etc. that compete in the aviation space.
The move comes in the backdrop of the stressed financial position of the airline. The freeze on the hike has however been opposed by pilots. The National Aviators’ Guild (NAG), Jet pilots’ association had held its Annual General Meeting (AGM) on March 29 and decided to find ways to protest on the issue. The NAG in a letter said that the pilots of Jet Airways were briefed on the salary increment freeze applicable from April 1, 2017, for a period of three months, after which there will be a review by the management. “The pilots expressed dismay at the anticipated loss of income especially in the current tax environment and the utter disregard of a hard-fought agreement,” a letter sent by NAG was quoted by Economic Times.
The airlines said that the decision of freezing the salaries has been taken as there is an immediate need to stabilise the employee cost. It is applicable to all employees in manager grades M3 and above and will be effective April 1, 2017. “We understand that these measures are difficult and unsettling, but are unavoidable”, the airline’s mail was quoted by TOI.
During the Financial Year 2017, the airline spent around Rs 2,316 crore on salaries of 15,000 employees. Out of the 15,000 employees, 2,000 are pilots that account for nearly half of the wage bill. Moreover, the employee cost was up by 26 percent on a year-on-year basis for the period, a Moneycontrol report mentioned.
Passenger Load Factor (PLF)
Despite a spike in passenger load, Jet Airways’ revenue numbers for the quarter that ended December 31, 2016, show the airline’s income from operations declined this fiscal as compared to the same period last year. The Passenger Load Factor (PLF) of the private carrier also went down in March to 79.8% from 86.9% in February, the Directorate General of Civil Aviation report stated. As per an Economic Times report, the revenue this year fell to Rs 14,703 crore for the three-quarters of FY17 against Rs 14,714 crore during the same period last year.
Earlier this week, National Aviators’ Guild (NAG) which is the Jet’s pilots union asked the Indian pilots not to fly with the expat pilots after one of the foreign pilots allegedly assaulted a trainer in Bengaluru recently. Jet has about 100 expat and 860 Indian commanders for its mixed fleet of Boeing 737, 777; Airbus 330 and ATRs. On April 15, NAG issued a directive to its members saying they are not to fly with the expats pilots from May 1. The NAG directive said, “The safety of our passengers and pilots is of prime importance and these kind of issues cannot be tolerated at all. The expats are also a huge drain on the company’s and the nation’s finances.”
After reeling under a crunch, the Jet Airways has decided to freeze salary hikes and introduces variable pay to cut costs. Jet Airways is also introducing a 15-20 percent variable pay component for its top management to save cost on wages, Business Standard reported. The airlines, when compared to others, have a higher cost structure and as part of a cost control exercise, it will include 100 senior officers under the variable pay scheme. Other airlines that have adopted the variable pay structure are Vistara and SpiceJet . Jet Airways has 17% of the domestic passenger market share and a sizable international presence. Despite this, the airline has been losing domestic market share to rivals like IndiGo, which now controls about 40% of the local market in India.