In a bid to trim operating costs, Mumbai-based Indian international airline Jet Airways has proposed its employees to take a pay cut of up to 25 percent from August. The company has been planning to revamp its high cost structure; and for the last past couple of quarters, it has been looking at restructuring its non-fuel costs to minimise its debts.
According to media reports, employees with annual salaries of up Rs 12 lakh will receive a 5 percent cut, while those in the senior management roles with an annual salary of Rs 1 crore and above will see a salary cut of up to 25 percent. A Jet Airways spokesperson said that given that payroll is among the most important components of the airline’s high cost structure, the senior leadership has undertaken a reduction in their salary to lead by example for other employees.
The crew affected by the move include the carrier’s pilots, who had protested against a pay cut which took place in June 2017. Last year, over 300 pilots were asked by the management to take a 30 to 50 percent salary cut or quit. In a letter to the junior pilots, the airline had cited rationalisation of fleet and network as the reason behind the move, Fortune India reports.
During an earnings call for the June quarter of FY18, Jet CEO Vinay Dubey had told analysts that the airline business was “highly vulnerable to global socioeconomic changes” and that incremental capacity additions in the domestic market had continued to “put pressure on yields”. Additionally, weaker economic conditions in the Gulf markets had resulted in depressed demand, “leading to lower load factors in that region”.
“Based on our cost optimisation initiatives, the company was able to offset the increases by a reduction in non-fuel,” he stated.
The company had said that it aims to achieve a reduction of 12-15 percent in non-fuel cost in the next 8-10 quarters and employee costs was a significant expense for the company. The carrier has the highest cost structure among private carriers. Employee costs for Jet Airways for FY18 stood at nearly Rs 3,000 crore, against Rs 2,890 crore in the previous year, registering a 3.6 percent increase.
Jet Airways deputy CEO and chief financial officer, Amit Agarwal during an earnings call for the fourth quarter of FY18 had said the airline was confident of achieving its non-fuel cost target. But, such a move comes with its own challenges. The industry currently faces an acute shortage of commanders, and a pay cut could result in their mass exodus.