Give Jet employees a chance to run the airline

With lenders set to start bankruptcy proceedings against Jet Airways, the employees of the airline, who have repeatedly petitioned the government to consider their proposal to revive the company, deserve a serious hearing.

The proposal of the employees hasn’t found traction from the consortium of banks led by State Bank of India for various reasons, one of which could be because it fears that it may not be able to recover its monies and may, in fact, have to pour more into the ailing airline.

To a large extent, such a fear seems justified. There are very few companies in India which are being run by the employees, and fewer still which are successful. In the domestic airline industry, there are none and hence no template for the lenders and the government to refer to.

Therefore, lenders have studiously ignored the employees’ proposal. But that is where they need to take a leap of faith.

One of the earliest instances of employees taking control of a company in India was in the case of the now-defunct liquor giant, Shaw Wallace. The promoters of the company left the running of the company to a clutch of senior employees after they sold off their stake.

SP Acharya, who started his career with Shaw Wallace as an assistant accountant rose to become its chairman and managing director. He ran the liquor company quite successfully, launching brands which are the toast of consumers even today, until a boardroom battle with the eventual owner, Manu Chabbria, forced him to step down thereby ending perhaps one of the few instances of employees running a big corporation in India.

United Airlines

If there are hardly any such experiments of employees running companies in India, it isn’t so in the US and Europe. In the airline industry, the biggest, of course, is the one involving United Airlines.

In 1994, when Bill Clinton was US President, United Airlines employees won a seven-year battle, mainly with the shareholders, to gain control of the airline. But it wasn’t easy for the employees, though. Having been able to convince the shareholders was just half the job done. The employees had to make several sacrifices, including taking deep cuts in salaries and benefits in order to run the airline.

Though the employees were able to get 55 per cent stake in the form of ESOPs in the airline, they had to give up about $5 billion in prospective wages and benefits over the next six years.

The only difference between United Airlines and Jet Airways is that when the employees took over the control of the US airline, it was still healthy. There were no large unpaid dues to vendors, workers or even the banks. In the case of Jet, such an effort comes with several handicaps as the wage bill itself is at about ₹800 crore and the airline owes about ₹8,000 crore to the consortium of banks.

United Airlines employees ran the airline quite efficiently for some years; grievances among workers fell by nearly two-thirds with a far fewer number of them reporting sick. But as all good things come to an end sooner than later, fights broke out among labour unions over ESOP payouts. The ultimate tragedy which downed the airline was when terrorists chose a United Airlines flight to crash into the World Trade Centre on September 11, 2001; the carrier was all but finished and eventually went into bankruptcy.

Jet’s issues

Jet Airways finds itself in a different situation vis-a-vis the concerns that confronted United Airlines employees when they took over the running of the airline. Firstly, there is no management in the case of Jet to speak of, as almost everyone at the top level has left while the founders have stepped down from the board. Therefore, it will be easier for the employees to pick their own team without any resistance.

What the airline lacks is funding which, if the government intervenes, can be raised quite quickly. And perhaps the biggest positive is that all the employees unlike those with United Airlines, will be a willing party to any agreement that gets signed with the lenders as well as Etihad, which has a 24 per cent stake in the airline.

Not just that, there will be a groundswell of support and the enormous goodwill if the employees are allowed to take over the airline, a factor which cannot be ignored.

What regulators including SEBI and DGCA need to do is open their arms to the employees, because all stakeholders involved in this experiment will be creating history in corporate India and laying the path for more such experiments.

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