Indian Airlines HR Problems

‘FIGHTER'PILOTS? contd...

TABLE I
IMPACT OF STAFF COST HIKE IN FARE INCREASE (%)

Date of fare increase	Impact (%)
25/07/1994	16.22
1/10/1995	25
22/09/1996	36
15/10/1997	13.44
1/10/1998	8.8

Source: IATA-World Air Transport Statistics

Initially, Sen's efforts seemed to have positive effects with an improvement in aircraft utilization figures. IA also managed to cut losses during 1996-97 and reported a Rs 140 mn profit in 1997-98. But recessionary trends in the economy and its mounting wage bill pushed IA back into losses by 1999. Sen and the entire board of directors was sacked by the government.

In the late 1990s, in yet another effort to appease its employees, IA introduced the productivity-linked scheme. The idea of the productivity linked incentive (PLI) scheme was to persuade pilots to fly more in order to increase aircraft utilization. But the PLI scheme was grossly misused by large sections of the employees to earn more cash. For instance, the agreement stated that if the engineering department made 28 Airbus A320s available for service every day, PLI would be paid.

This number was later reduced to 25 and finally to 23. There were also reports that flights leaving 30 - 45 minutes late were shown as being on time for PLI purposes. Pilots were flying 75 hours a month, while they flew only 63 hours. Eventually, the PLI schemes raised an additional annual wage bill of Rs 1.8 bn for IA. It was alleged that IA employees did no work during normal office hours; this way they could not work overtime and earn more money.

Though experts agreed that IA had to cut its operation costs. To survive the airline continued to add to its costs, by paying more money to its employees. (Refer Table II). The payment of overtime allowance (OTA) which included holiday pay to staff, increased by 109% during 1993-99. It was also found that the payment of OTA always exceeded the budget provisions.

Between 1991-92 and 1995-96, the increase in pay and allowances of the executive pilots was 842% and that of non-executive pilots was 134%. Even the lowest paid employee in the airline, either a sweeper or a peon, was paid Rs 8,000 – 10,000 per month with overtime included.

TABLE II
INCREASE IN STAFF COSTS

Year	Staff cost (in Rs bn)	No. of employees	Per employee cost (in mn)	Total expenditure (in Rs bn)	Staff cost as percentage of total operational expenditure	Effective fleet size
1993-94	2.85	22182	0.13	20.75	15%	54
1994-95	3.74 (31.18%)*	22683	0.16	22.59	19%	58
1995-96	5.71 (52.59%)	22582	0.25	26	25%	55
1996-97	7.10 (24.35%)	22153	0.32	29.29	26%	40
1997-98	8.17 (15.03%)	21990	0.37	32.21	27%	40
1998-99	8.75 (7.12%)	21922	0.39	34.31	28%	41

Source: IATA-World Air Transport Statistics
* Figures in brackets indicate increase over the previous year.
# Excludes 4 aircraft grounded from 1993-94 to 1995-96 as well as 12 aircraft leased to Airline Allied Services Ltd. from 1996-97 to 1998-99.

TABLE III - A COMPARISON OF VARIOUS AIRLINES

TROUBLED SKIES