Flag carrier faces more labour strife

Prashant Sukul, the senior civil servant co-ordinating the rescue of Air India, is preparing himself for another wave of the strikes that have paralysed the airline over the past month in a dispute over bonuses. "There is going to be some more labour discord, there's no doubt about it," he said. "It's not easy to get people to accept a pay cut like that."

Mr Sukul plans to meet employee representatives some time this week to re-examine the decision to cut the incentive pay of 7,000 Air India workers in half. Pilots from Air India staged a co-ordinated "sickness protest" days after the cuts were announced on September 20, with 180 of them simultaneously staying home. Four days in, the civil aviation minister Praful Patel intervened, forcing Air India into a climbdown and assuring that executive pilots and engineers would receive their full incentive pay and that all aspects of the restructuring would be re-examined in consultation with employees.

"The decision to act tough and then to withdraw it all in the matter of a week has not helped matters," said Kapil Kaul, the director of Delhi's Centre for Asia Pacific Aviation. "This has happened with executive pilots, who are not unionised, so now who knows what happens when they implement things which affect unionised workers." Mr Sukul, one of three who will sit on the new consultation committee, is adamant that pay cuts will nonetheless be inevitable, whatever assurances have been given.

"This has to be done, because if it's not, no other form of cost control will be achievable," he said. This is not the first time Mr Patel has bullied an airline's management into an abrupt U-turn. The Jet Airways chairman Naresh Goyal gave 800 redundant cabin staff back their jobs in October last year, after a sharp rebuke from Mr Patel. Still, if Arvind Jadhav, the new chairman at Air India, finds that his political paymasters refuse to back him at the first sign of discomfort from Air India's pampered staff, the Herculean task he faces in turning the airline around may well become impossible.

Air India lost more than US$1 billion (Dh3.67bn) last year and is seeking a $620 million injection of equity and soft loans from the government just to continue operating. The company said this week it was on track to lose a similar amount this year, after a $431m shortfall in the January to June period. Mr Jadhav argues that the airline's salaries are already higher than those of comparable organisations, and wants to change the incentive plan - brought in to keep private-sector competitors from poaching Air India's pilots - so that it actually rewards achievements rather than just topping up salaries.

Rajeev Batra, the head of transport advisory services at KPMG, said cutting compensation was simpler than rooting out the many inefficiencies that went deep into the organisation. "Taking back the incentives is the quickest form of saving on the bottom line, which is inevitable," he said. "It has to happen - to what extent can we, the public, keep on funding a loss-making airline?" Mr Jadhav is also planning other, less contentious, reforms, such as reductions in Air India's routes, splitting off the ground-handling operation and making parts of the airline low-cost. The next stage will be the appointment of a consultant to draw up yet another Air India restructuring plan, with McKinsey and Booz & Company leading the running.

That at least should bring six months or so of quiet deliberation. But however brilliant the consultants' minds, after Mr Patel's performance last week, it looks unlikely that anything they come up with will ever be implemented. @Email:[e-mail]