Air-India has secured government approval for the first voluntary retirement scheme in its history, while awaiting a report from consultants that could lead to staff numbers being cut further through the outsourcing of non-core activities.

The early retirement scheme was formally launched late in February after the state-owned carrier won approval from the government. Air-India says that applications from employees will be accepted until 30 April. Managing director J N Gogoi expects the scheme will lead to staff numbers being cut by between 1,000 and 1,500. The airline, which has a fleet of 30 aircraft, has a workforce of more than 16,000.

Government and union rules bar the airline from forcibly cutting jobs in India although it has managed to reduce staff numbers by around 2,000 over the past three years through natural attrition, the closure of some overseas offices, the lowering of its retirement age from 60 to 58 and by allowing employees to take up to two years of unpaid leave.

Gogoi says Air-India hopes the government will also allow it to outsource non-core operations in future. Management consultancy AT Kearney was hired by the government late last year to study ways to improve operations at Air-India and fellow state-owned carrier Indian Airlines, which largely flies domestic routes and employs a workforce of around 20,000.

An initial report is due shortly and a final report in June, and Gogoi says it is expected to make recommendations on outsourcing. "If we are allowed to do things in a more optimal manner, the major thing is we would like to outsource activities," says Gogoi.

Due to what he calls "historical requirements" - mainly because the airline used to be seen by the government as an employment machine - Air-India has had to maintain in-house capabilities for virtually all activities, from ground transport services to building maintenance.

"Given the choice, these are the activities that can be done at a lower cost by our choosing, but that is not possible today. On a larger scale, we probably need to outsource our engineering activities, our engine overhaul activities, and the reservations activities," says Gogoi. "We need to take out the activities that are not core activities - do it outsourced at a lesser cost and run an airline which is the main line of our business." n


Source: Airline Business