The Cabinet Committee on Economic Affairs has cleared an infusion of Rs 1,200 crore (Rs 12 billion) in cash-strapped Air India and allowed the airline to open all earlier wage agreements.
The airline hopes to gain credibility in the market with infusion.
"The government's decision to approve the infusion of Rs 1,200 crore as equity will help Air India operationalise its financial restructuring plan and give a signal to the financial markets, thereby helping in confidence-building measures," said the airline, quoting chairman and managing director Arvind Jadhav.
This infusion will increase the equity base of Air India to Rs 2,145 crore (Rs 21.45 billion).
The airline had received Rs 800 crore (Rs 8 billion) last financial year.
Armed with the go-ahead, Air India has announced it will revisit wage agreements next financial year.
"Being a Central Public Sector enterprise, government support in human resource issues is vital.
"Government support on wage and wage-related issues will enable the management to initiate discussions with the unions/associations on a wide range of issues. We will start the process of discussions with unions/associations in 90 days," the airline said.
The airline wanted to rationalise pay. Incentives were paid on the basis of the number of aircraft serviced, which meant, even if a craft was operating with 60 per cent payload, payment was made for all seats.
"By changing it to the number of passengers, the incentive will be paid for only 60
per cent of the flight and the employees will work more to ensure they get full payment," said a senior Air India official.
At present, there are 10 wage agreements signed between 14 unions and the management. After the Mangalore air crash, two unions were derecognised, as they went on an 'illegal' flash strike.
The employees' unions have been opposing moves to slash wages or allowances, contending the airline's wage bill was only 18 per cent of the total turnover, compared to a global average of about 22 per cent for most international carriers.
Over and above these infusions, the airline has demanded Rs 2,000 crore (Rs 20 billion) in the current financial year. This infusion will give the airline room to negotiate with oil companies and banks.
The carrier, with accumulated losses of over Rs 15,000 crore (Rs 150 billion), has shown improved results. During April-November, its revenues grew 22 per cent to Rs 7,250 crore (Rs 72.5 billion), compared to the same period last year.
Network revenue on domestic flights also jumped, by 35 per cent, from Rs 2,110 crore (Rs 21.1 billion) in the same period last year to Rs 2,849 crore (Rs 28.49 billion) this year.
The Cabinet Committee on Economic Affairs has cleared an infusion of Rs 1,200 crore (Rs 12 billion) in cash-strapped Air India and allowed the airline to open all earlier wage agreements.
