Editorial: Time to Eliminate Unions at Air India

When the Indian Pilots Guild, one of two pilot unions at national carrier Air India, began a strike around 2 weeks ago, it once again illustrated the deep fallacy of the employee situation at Air India. Coming on the heels of a $5.8 bailout package over 8 years offered by the Indian government, IPG’s industrial action marks just the latest in a series of missteps from India’s beleaguered national carrier, which lost Rs. 7,853 Crore in 2011-12, or more than Rs. 20 crore per day. However, the situation had improved (it went from being a gigantic financial black hole, to a smaller financial black hole) since private carrier Kingfisher shrank by more than 50% earlier this year, with Air India losing just Rs. 10 Crore per day. But this strike by IPG has once again cast doubt on Air India’s ability to move forward.

For such petty grievances as non-exclusivity on 787s and marginally different work rules between the IPG and their former Indian Airlines counterparts the IPCA, 10-12 of Air India’s 20 Boeing 777 aircraft have been grounded, and the carrier has been forced to all but cancel most of its international network. As of right now, 7 European and North American services are mostly cancelled (Delhi-Paris-New York JFK, and Delhi-Frankfurt-Chicago are still quasi-operational), while 12 routes to the Gulf and 6 Asian routes are cancelled as well. These international cancellations and the general strike have cost the already near-bankrupt airline more than Rs. 230 Crore over the first 13 days of the strike, with no apparent respite in sight.

The new civil aviation minister Mr. Ajay Singh, who is apparently far more pragmatic and sensible than his predecessors, has threatened to withdraw Air India’s bailout package. “This is bailout is not without strings. They have to meet strict standards. If they meet these standards, then we will release public money. We can’t keep pouring public money. This is the last chance for them to perform.” He also urged the pilots to return to work, even offering an olive branch to downplay fears of reprisal, “Strike is not an answer to solve your grievances,” he said, “All the grievances will be heard unconditionally. [Pilots] must come to talks unconditionally … please go back to work….Air India management will in no way be vindictive towards any employee …. a lot of young people have just joined (as pilots). But the first priority should be that passengers are not inconvenienced.”

There is a hint of legitimacy to IPG’s claims and grievances. After all, the Aviation Ministry made a remarkable hash of things by failing to properly integrate Indian Airlines and Air India pilots on basis of seniority. By keeping the two unions separate, Air India has created an environment in which the pilots of the respective unions are continually thinking in terms of an “us versus them” sort of mentality; each seeking to enrich itself as opposed to the company as a whole. To be sure, it is unlikely that IPCA members would have ever operated 787s or any widebody aircraft for that matter, had Indian Airlines remained a standalone carrier. And the disparities in work rules are tangible for IPG’s pilots. The following two graphics (from the Economic Times) will give a good overview of the issue.
But in a broader sense, most of what IPG is asking for amounts to nothing more than holding Air India and the Ministry of Civil Aviation ransom. Notice in the first graphic above that ex-Air India (IPG) commanders make a whopping 8-9 lakhs per month. This is roughly $190,000-$210,000 per year; levels not reached at most (profitable) Western and Asian airlines until 15-20 years of service. Meanwhile, they also have the audacity to ask to be shuttled in first class. Forget pilots, most executives at private airlines don’t get to fly first class, yet IPG insists on forcing its pilots into taking up such seats which could instead be sold as upgrades or used to improve frequent flyer loyalty (through free upgrades). These pilots are, by some measure, the highest paid in the world, yet they keep asking for more and more pay and benefits. Clearly, there is a disconnect between how IPG views the Indian airline scene and the current market reality.

To be fair to the IPG, they alone are not at fault here; as in most cases of labor strife, the blame is shared between management and the unions. But the continual labor strife at Air India brings up another question… Why does the IPG exist in the first place, and should it? Generally speaking, government-run corporations (especially prestige projects like an airline) have dismal financial performance, because there is no incentive to be profitable. Company leaders (and employees) know that even if the airline is poorly run, bloated, and offers horrid service quality, they will keep their jobs (the government will fund their operations and debt).

The thing is, public sector unions understand this as well; they know that even if their demands would bankrupt a normal carrier, the Sugar Daddy (Government of India) will pay for it anyway. Secondly, public sector unions play a large role in choosing who their bosses will be (both by directly voting and manipulating public opinion); when you can pick your bosses, the quality of your work tends to decrease. What this creates is a perverse scenario where unionized Air India workers can get cushy pay and benefits, yet have almost no incentive to do their jobs – to provide good service, be productive, or even do their jobs properly. They are also able to throw out any boss who dares to challenge their demands. Thus the combination of a public sector company and unions creates a toxic cocktail of reverse incentives that prevent Air India from becoming a successful company.

While the profit motive may not appear at Air India for some time, at least the unionization scourge can be removed. This strike not only affects Air India, but each and every Indian as well (at least those that pay taxes). And every time Air India’s unions ask for wages and benefits above the market rate or go on strike, they are robbing you, the taxpayer, of your hard earned money. When pilots at Jet Airways strike (as at Air India), they ultimately harm the shareholders of the company (private citizens for the former, the taxpayers of India for the latter). But the difference is that Jet Airways’ shareholders voluntarily invested in that the company; they went in knowing the risks. Meanwhile, you pay taxes that support Air India regardless of whether you want to or not. Stop allowing Air India’s unions to rob taxpayer money… ban unions at Air India.

About Vinay Bhaskara

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