CoVid19: Did Indian airlines make payroll for March 2020?

There has been a lot of turmoil in the world of aviation. Just one month and things changed drastically. Just about March 15, 2020, I was asking people if they were still flying, and they were, with aircraft having 80-90% loads. However, in a statement issued on March 11, 2020, IndiGo mentioned,

Over the past few days however, week-on-week, we have seen a 15-20% decline in our daily bookings. Please note that the numbers could change from here based on how the situation evolves.

Things changed even more after the WHO declared it a Pandemic and then the Government of India progressively shut down the aviation infrastructure of the country. Flights across India were first cancelled through March 31 and then cancelled through April 14, 2020. And then, who knows how long these aircraft will be on the ground.

For the financial situation of the airlines, this is not good news at all. Airlines get their working capital from reservations of the customers and then use the money to pay salaries, aircraft lease, fuel bills and other bills. Money that remains is the profit. Some airlines like IndiGo, which buy planes in bulk, and hence at deeper discounts than others, use the sale and leaseback model to also eke out an additional profit by selling the aircraft to the lessors at a higher price than what they purchased them. Most airlines though, don’t get that far to build a sizeable cash reserve, at least in India. Like Richard Branson once said,

The quickest way to become a millionaire in the airline business is to start out as a billionaire

Anyhow, with whatever money they even have left, airlines are now trying to stem their financial bleeding. With no sources of income right now, airlines have switched to borrowing from customers, offering them vouchers instead of cash for future flights. I have my views about that but saving it for another day. Alexandre de Juniac, IATA’s Director General and CEOIATA, the industry body, on March 31, predicted,

Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of $39 billion in the second quarter. The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter. 

Anyhow, the lack of cash in most airlines is most worrying, but first and foremost for the airline employees who are at the frontline, and many are still working at the moment, even if from their homes. Let’s take a look at how the airlines are dealing with their Human Resources in these tough times.


IndiGo

IndiGo is arguably the best-prepared airline of the whole Indian aviation system at the moment, with over INR 20,000 crores in the bank. However, IndiGo still decided to do some cost savings while they even could, all of which look within reason. On March 19, IndiGo announced a pay cut for all employees starting April 1. Here is a part of the memo that went out to all employees,

With the precipitous drop in revenues the very survival of the airline industry is now at stake. We have to pay careful attention to our cash flow so that we do not run out of cash. Unfortunately, this means that we have to reduce our costs in line with the drop in revenues. With a great deal of reluctance and a deep sense of regret we are therefore instituting pay cuts for all employees excluding Bands A & B, starting 1st April 2020. I am personally taking a 25% pay cut, SVPs & above are taking 20%, VPs & cockpit crew are taking a 15% pay cut, AVPs, Bands D along with cabin crew will take 10% and Band Cs 5%. We know how hard it is for families to take a cut in take home pay. But unfortunately, it is impossible for our company to fly through this economic storm without all of us making some sacrifices.

However, for March 2020, many IndiGo employees have confirmed to me that they got their full salary credited to their account on March 31, 2020.

Amongst other HR-related cuts, IndiGo suspended their leaves encashment programme for pilots, where IndiGo used to allow pilots to work more and take less leave to battle a shortage of captains.


Vistara

Vistara 787-9 VT-TSD undergoing testing at Everett (Image Credit: Matt Cawby)

Vistara, still in its formative phases and running in a loss did not do something about this situation, except making sure their employees got their salary a week in advance, on March 24, when they had to start complying with the work from home orders.  However, there has been a modest cut on Vistara employees recently. Many of their 4000 employees will get leave without pay, between 1-3 days during April 2020. However, Level 1A and Level 1B will not be subject to this rule.  Also, as per media reports, the salary increments and variable pay have been moved to July 2020 for the moment.


GoAir

GoAir

GoAir

GoAir CEO Vinay Dube, on March 25, wrote to all employees announcing a pay cut across the company, except for the lowest paygrades inside the company. Here is an extract of the email,

Under the current conditions we find ourselves in, we are left with no option but to extend salary cuts for all of us for the month of March. We will ensure that the lowest pay grades suffer the least.

The email followed on to say,

GoAir will find a way to compensate all of you for the sacrifice you are being asked to make at this juncture.

GoAir went on to let go about 80 ex-pat pilots and aks staff to go on a short term and temporary leave without pay. Further, the top leadership team took pay cuts up to 50%.

On March 31, GoAir posted the salaries of the employees but did not meet their commitment in full. An email went out to the employees of the company from the CEO, which explained that a part of the salary had been deferred to April 2020.

All employees in Grade’s D and below received salaries in their entirety. The rest of you will see less than what you are normally used to seeing as a result of the reduction in pay I had announced earlier, but also because we have been forced to defer a portion of your accrued salaries to April.


SpiceJet

SpiceJet has been working with very little ammunition in terms of their cash reserves to go through this. Last reported they had less than INR 100 Crores in the bank as of September 2019 as per their filed financial statements to the exchanges.

SpiceJet first let go all the pilots who were serving their notice period. The usual notice period in India for a pilot is 6-12 months depending on when they signed their contracts, but instead, SpiceJet relieved them from March 23, 2020, onwards itself.

On March 31, 2020, SpiceJet announced a pay cut of up to 30% for employees. A part of the email that went out to employees read,

The Spicejet management has decided to implement a pay cut between 10% and 30% in March 2020 across our employee base. Our Chairman and Managing Director, in fact, has opted for the highest cut of 30 percent in compensation.

We have, however, ensured that our colleagues in the lowest pay grades remain unaffected by this decision. So, they won’t be facing any pay cuts at all.

Unfortunately, due to the lockdown, we are also forced to announce ‘leave without pay’ for employees during March 25-31, 2020 —the period of the lockdown when all passenger flights were suspended.

SpiceJet has, however, assured the employees who were working during the lockdown that their pay will not be withheld.

However, SpiceJet was not able to meet the full financial commitment as well. SpiceJet is going to credit the salary for employees in two parts, with the second part coming on April 2, 2020. The statement from SpiceJet said,

“A decision had been taken to credit the salaries of some employees, those who are entitled to a flying or performance allowance, in two parts. The first part of the salaries was credited today and the second part will be credited on April 2, 2020.”

However, this has led to many employees just getting a couple of thousands as their salary end of the month, and angry employees as a result.


Air Asia India

Air Asia India has not made any pay cut announcements at the moment, and the measures towards cost-cutting are more focussed on slowing down its thin operations. An Air Asia India employee has confirmed to us that they received their entire salary on March 27, 2020.


Air India

Air India had earlier mentioned to the press that given the coronavirus, Air India is going to cut the allowances of all employees except cabin crew by 10 per cent for three months from March 2020. Air India pilots haven’t received flying allowances since January and international layover allowances for February and March.


Air India Express

We haven’t been able to establish if any cuts were done at Air India Express, but we do have a confirmation that Air India Express paid salary in full to their staff.


Bottomline

These are tough times for the industry, no less. We don’t know how they will get through this. There are no signs of a bailout for the industry, and while I am in favour of the workforce getting paid, I am not sure if an airline or two will not fold up in the current scenario. We have to consider the fact that while March was a partial impact, April will not see flying for the first half of the month, and even when flying comes back, I don’t see the public buying air tickets on day one.

For the airlines which paid their employees in full, good on you! For the rest, please make sure you first pay people down the order before you pay the highest cost resources. For airline employees, we sure do hope you get your dues soon. 

What do you make out of the current payroll situation for Indian carriers? Who do you think will come out stronger and who will come out weaker?


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