ibnlive » India

May 07, 2011 at 07:46pm IST

Performance incentive plan killing Air India

New Delhi: A CAG report with CNN-IBN says that Air India has been rewarding employees despite the airline's poor financial health with Rs 1500 crore being paid yearly in performance linked incentives.

So the 10-day strike by Air India pilots comes as a blessing to the airline, which will not need to pay out April salaries, stemming a large amount of red on the balance sheet.

In 1999, Air India introduced performance linked pay, hoping to improve productivity and efficiency.

The evaluation parameters were far below the average in other airlines. Despite this, Air India hiked incentives in 2005, and again in 2008.

A CAG audit shows airline profitability and load factor were not even considered while evaluating performance.

The audit says incentives paid were between 62 per cent and 919 per cent of salary and government guidelines say it cannot exceed 50 per cent.

Air India paid out Rs 473 crore in incentives, nearly Rs 300 crore of this going to officers. A struggling management recommended that halving performance linked incentives would save Air India Rs 600 crore.

General Secretary ACEU Arun Malhotra said, “Fifteen per cent of the employees are getting 85 per cent of the salaries. So, their wage bill put together is so much that they get 85 per cent of the entire Rs 4000 crore, which is around Rs 3400 crore. About Rs 600 crore is what 85 percent employees get. So it is a darker side of Air India.”

In comparison with other airlines Air India spends the most on its 40,000 odd employees, the wage bill along over Rs 3000 crore. But the productivity is not commensurate. It is the lowest employee cost per revenue passenger kilometers.

A 2009 competitive survey by international rating agency Skytrax termed Air India outdated, apathetic, grudging and unpleasant

Today, of a yearly wage bill of Rs 3000 crore, half is paid out as performance linked and flying allowances. As a former officer famously said while Air Indians get richer, Air India gets poorer by the day.