Air India may opt for a BSNL-like voluntary retirement scheme to shed employee cost along with debt

• Air India’s total employee strength stands at 17,984, out of which 9617 are permanent employees. Over 36% of the permanent employees will be retiring in the next 5 years.
• The Government of India issued a new expression of interest for 100% sale of the troubled state-owned airline.
• There are reports of interest from HIndujas and Tatas in bidding for the airline.

The government wants to ensure that Air India is sold this time around, as it has also cut down the debt that the new owner will take onto the books. But there remains yet another hurdle that has been keeping the state-owned airline from being sold - its employees and their unions.

According to a release from the Ministry of Civil Aviation, the airline has 17,984 employees, out of which 9,617 are permanent. Over 36% of the permanent employees will be retiring in the next 5 years - that is almost 3,000 of them.

“The trade union representatives are said to have discussed with the management all the issues concerning their employment such as service-contracts, job-security, gratuity, pension and voluntary retirement scheme after the company goes into private hands,” a source told PTI after a panel of Air India management and trade unions met in Delhi recently.

These employees could now seek what other troubled state-owned companies like BSNL and MTNL received.

Voluntary retirement scheme for Air India - before or after the sale?

The Indian government had retired over 92,700 employees via VRS for the employees of the debt-laden BSNL and MTNL– the telecom giants that it’s trying to merge and revive. However, with Air India’s sale and privatization in mind, VRS could be a risky move as it is uncertain about the liability of the settlements. But it will also offer an opportunity for the government or the bidder to cut down on the number of Air India’s employees.

And, there are other issues that have to be cleared by the buyer as well. As per the bid document, 3% of equity shares of Air India are to be offered to the permanent employees of Air India as stock options. However, employees’ dues of about ₹1383.7 crore will be cleared by the government, before the transaction closes.

The Government of India’s new expression of interest for 100% sale of the troubled state-owned airline, has already taken a large chunk of the liability onto itself. As per the revised EoI, the bidding party will have to bear ₹23,286 crore of the total ₹60,000 crore debt of Air India. And the deadline for bidders is set on March 17. The net worth for eligible bidders too has been relaxed to ₹3,500 crore from ₹5,000 crore.

Tatas and Hindujas show interest in Air India

An IANS report quoted a private airline senior executive to say that the deal is sweeter than expected. And it seems to have had its effect. According to recent reports, Tatas who run Vistara along with Singapore airlines, might bid for Air india. In an interview with TOI in November, Tata Group Chairman N Chandrasekaran said that he will get his team to look into the matter.

“Ideally it should be a Vistara decision, not a Tata Sons decision. I’m not going to run a third airline (in addition to Vistara and AirAsia) unless we merge. There are issues. I will never say yes or no. I don’t know,” he told TOI. Interestingly, Air India was run by the Tata Group before the Indian government acquired a 49% stake in the airline in 1948.

The Hinduja Group has also reportedly expressed its interest in bidding for the airline.

See Also
Indian government sweetens Air India sale by slicing its debt burden by more than half
Indian government is looking to sell Air India but may keep its debt