The cash-strapped national carrier Air India is likely to discuss a fresh voluntary retirement scheme (VRS) on Tuesday. The company has approximately 36,000-40,000 employees, the highest in the industry in both absolute and per aircraft terms.

“This is one of the 32 items listed for board meeting. The Government is willing to provide one-time financial support to the proposal to shed flab. This financial support could be part of equity infusion,” a person familiar with the development told Business Line.

After the board's consent and approval from the Government, the company will formalise the details of the proposal and implement it.

The person declined to divulge the number of employees which the airline hopes to reduce through the VRS. But it is likely to offer VRS to staff other than pilot, engineer and cabin crew. At present, the company's annual wage bill is around Rs 3,600 crore. The Group of Ministers (GoM) has already asked the airline to implement VRS.

The debt-laden company has nearly 40,000 regular employees. However, if the company hives off two divisions, namely the ground handling (MRO) and the maintenance, repair and overhaul (MRO) divisions into separate business units, then only half the employees will remain with the airline.

Earlier, the airline had implemented a VRS in 2003 and a few years ago, it had offered long leave without pay to its employees. Both the schemes met with little success.

At present, the company has 156 aircraft (including those of Air India Express and Alliance Air). With the addition of contractual employees to the regular employee numbers, employees per aircraft touch almost 400, which is one of highest in the world.

Internationally, employee per aircraft ranges between 200 and 220. Other domestic airlines have 100-150 employees per aircraft while a low-cost carrier has less than 100.

The group of officers, convened by the Group of Ministers under the chairmanship of the Finance Minister, had mooted the VRS proposal at a review meeting on October 28. It recommended rightsizing of staff with an appropriate VRS package, to be worked out in three months.

The group of officers also recommended that the productivity-linked incentive scheme needs to be stopped until profit before tax is generated. This has also been made one of the milestones for release of equity by the Government. “This is a tough measure as incentives account for up to 50 per cent in certain categories of employees,” the source said. However, any decision in this regard will depend upon the Government.

(This article was published on November 28, 2011)
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