Air India gets busy with VRS before disinvestment

With average age at 55 years, a large number of employees are close to retirement, making VRS negotiation easier

The government is counting on the average age of 55 years among the non-technical Air India employees as a human resources (HR) blessing, ahead of disinvestment of the state-owned carrier.

With a large number of employees left with only three years for superannuation, the government is negotiating a generous voluntary retirement scheme (VRS) as part of the sale process. The retirement age at Air India is 58 years. 

Air India and its five subsidiaries together have around 22,000 employees. Of these, Air India has around 12,000, including 897 pilots and 2,750 cabin crew. The pilots and cabin crew primarily make up the technical team. The remaining staff is non-technical, working in ground handling and management.

“The company’s average age of non-technical staff is 55 years. So, if provided a generous and just VRS package, they will accept it. The technical staff is highly sought after in the market and hence, the market will be ready to absorb them,” said a senior Air India official. 

The official added a high number of employees were superannuating every year. “In October itself, around 95 employees superannuated, and a similar number is going to retire at the end of November,” he said.

An official of the Ministry of Civil Aviation confirmed the plan. According to him, among the non-technical employees who don’t accept VRS, there is a plan to ask the new owner to absorb them for a limited time. “Around 47 per cent of Air India’s non-technical employees are in the last five to six years of their job, and they are likely to accept VRS.”

A similar model was used for the privatisation of Delhi and Mumbai airports. There was a clause under which GMR Infrastructure, which owns the bid for Delhi airport, had to absorb a number of employees. Later, they accepted VRS or returned to the parent organisation, the Airports Authority of India (AAI).

The higher average age of Air India non-technical employees is due to a hiring freeze since 2012. A panel under Justice D M Dharmadhikari, which examined the HR aspect of the Air India-Indian Airlines merger in 2012, recommended VRS for the airline’s staff strength of 28,000 then. The plan was to offer VRS to around 7,000 employees to bring parity to the staff-aircraft ratio. As a result, Air India had started a staff rationalisation process by freezing the hiring of regular employees. It has since then hired even pilots and cabin crew on contract. This also brought down the cost on staff, resulting in an increase in revenue per regular employee (a metric of employee efficiency) by over 12 per cent in FY16.

Following an improvement in rationalisation of employees, the government dropped the plan of VRS, as banks refused to fund the required package of Rs 1,100 crore, citing doubts over its repayment capability.

The Ministry of Civil Aviation, meanwhile, has given permission to a uniform wage structure for its pilots - solving the most complex HR problem of bringing harmonisation of pay between the wide body and narrow body aircraft pilots. The previous wage agreement was opposed by the wide body pilots as they felt it would lead to a cut of almost Rs 1 lakh per month from their salary. The government has agreed to a wage structure which provides fixed allowance every month to wide body and narrow body pilots. 

Ever since the merger between Air India and Indian Airlines, there was a demand to harmonise pay between the two groups of pilots. The pilots’ union had demanded clarification over wage structure before any decision on privatisation. “As a similar process for cabin crew was carried out two years back, this is the final step for harmonisation before disinvestment,” the Air India official said.