Full-service carrier Jet Airways has asked its employees to take a pay cut of up to 25% from August in a bid to trim its operating costs. Media reports said that employees with annual salaries of up to Rs 12 lakh will see a 5% cut, while those in the senior management with an annual salary of Rs 1 crore and above will take a cut of up to 25%.
“Payroll is one of the important components of the airline’s cost structure and the senior leadership has undertaken a reduction in their salary to lead by example,” a Jet Airways spokesperson said.
An official from the airline, on the condition of anonymity, said that the carrier has been looking at revamping its high cost structure; and for the past couple of quarters, it has been looking at restructuring its non-fuel costs to minimise its debts.
Those affected include the airline’s pilots, who had protested against a pay cut which took place in June 2017. According to several reports, last year the management had asked more than 300 of its pilots, who had joined in 2016, to take a 30-50% 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.
“We cannot take a further cut in our salaries,” a senior pilot, who declined to be named, said. While salaries of pilots have gone up substantially in the past couple of years, those at Jet have taken a cut, the pilot said, adding the management needed to look at other options for cost optimisation.
Jet CEO Vinay Dubey, during an earnings call for the June quarter of FY18, 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”. And 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 had said.
The company had said that it aims to achieve a reduction of 12-15% 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% increase.
Amit Agarwal, deputy CEO and chief financial officer, 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.
India’s second-largest airline by market share, Jet Airways posted a loss of Rs 1,040 crore in the fourth quarter of FY18. The fuel expense for the carrier rose by 31% (Rs 2,063.34 crore), from Rs 1,282.41 crore a year ago.