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Air India sale: Employee count least of buyer's worries, govt should ignore unions' protests

New Delhi: Employee unions of Air India are opposed to the government’s decision to disinvest this ailing airline. Employees, long used to PSU culture with little accountability, disproportionate perks and time-bound promotions are afraid of what the future holds. They may rightfully be scared about their livelihoods but this cannot be the only reason for the government to step back from its stated intent to bring on board a strategic investor. The employees are anyway reacting too soon – there is still no clarity on whether the government will exit Air India fully, in one go and whether it will seek a guarantee from any future investor in terms of absorbing existing employees.

This piece says the Air Corporations Employees' Union (ACEU), the largest among Air India’s unions, is planning to meet the group of ministers to be set up by the government to look into the disinvestment process. The ACEU is a grouping of Air India's non-technical staff and comprises more than a third the total 21,137 employees. Seven unions of Air India have already joined hands to oppose the privatisation process and they together wrote to civil aviation minister Ashok Gajapthi Raju last month, warning him of an "industrial unrest".

The article further quotes a member of ACEU as saying "The meeting will be held to enlighten the rank and file about the privatisation of Air India and how it will affect them. This will also be a forum to organise them as we plan a movement against the privatisation of the national carrier. The move is clearly aimed at benefiting private airlines. If the government is so concerned about the taxpayers' money, then why does it not recover Rs 7.5 lakh crore borrowed by corporates from public sector banks?"

As of now, the government has only announced it intent to disinvest Air India. It still has to decide crucial details like how much stake to offload, whether to first sell-off Air India’s profitable subsidiaries and land bank etc. Then, a decision on how much of the over Rs 50,000 crore debt on the airline’s books will be written off is also yet to be decieded.



Meanwhile, an industry veteran points out that Air India’s employee unions may feel they are duty bound to protest any move to bring in a private partner but they lost their sway over employees a long time back. “Look at it this way. Anywhere between 1500-2000 employees are set to retire each year for the next two-three years so the airline’s aircraft to manpower ratio will only improve going forward, not worsen. The unions are anyway not left with much credibility. And then, the licensed employees – the pilots and engineers – will try and find employment in the private sector if needed. What the unions are threatening to do is mere posturing, I do not think their threats will derail the disinvestment process”.

A few years back, Air India hived off two critical functions as two separate subsidiaries (ground handling and MRO) under a Turnaround Plan. This took off roughly half the manpower from the airline’s books and the aircraft to manpower ratio now stands at about 1:112. This means there are about 112 employees per aircraft in Air India (regular employees) which is a good ratio to have – Jet Airways has more people per aircraft while market leader IndiGo may have a little less. So the core airline, without the ground handling, MRO and other subsidiaries, is not really a bloated company.

An analysis by ICICI Securities’ Anshuman Deb said this morning that Air India’s employee costs were 12 percent of its overall cost structure in FY15 and FY17, similar to market leader IndiGO which had 11 percent of its costs as employee costs.

“The key takeaway is that the operational cost structure of Air India (ex-debt servicing and depreciation) has already seen a turnaround, while there is significant scope remaining to improve, especially on items like landing charges, maintenance and other expenses. A lot of these costs emanate from sub-optimal route network and sub-optimal fleet deployment. Further operational efficiencies can be achieved from improving the passenger load factor (PLF) and on-time performance (both lowest among big airlines),” Deb noted. So employee numbers are not really the biggest headache for any potential buyer of Air India, as long as the airline is being acquired minus its subsidiaries.

Apart from some employee unions, the only other entities protesting the government’s privatisation move are the Shiv Sena and the Left parties. The NDA government should work out a sensible way to get rid of Air India, the white elephant, in one fell swoop by offering 100 percent equity to a prospective buyer after cleaning up AI’s books. Any hesitation at this stage, whether due to employee protests or political compulsions, will only harm Air India further.

Updated Date: Jul 03, 2017 18:49 PM

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