Business & Finance

Jet Airways flies into financial turbulence; pilots reject pay cut proposal

New Delhi, Aug 3 (PTI) Amid rising concerns over its financial health and pilots on warpath over proposed pay cuts, Jet Airways today expressed confidence of overcoming the current issues as it said the mismatch between high fuel prices and low fares is the biggest short-term challenge.

On a day when its shares plunged 7 per cent, Jet Airways sought to assure investors and employees saying the airline is working on having a competitive cost structure, days after the management reportedly told staff that it does not have enough funds to continue operations for more than two months.

Seeking to dispel the concerns, Jet Airways today issued two statements — one as a filing to the stock exchanges and one to the media — besides a message to the employees.

Jet Airways — which has been flying for 25 years — today described reports that the airline cannot fly beyond 60 days as “incorrect and malicious” as well as denied any talks of a stake sale.

Earlier this week, the top management in a meeting with staff, including pilots, informed them that the airline is in a financially bad shape and sought their cooperation in reducing costs. The proposed steps include pay cuts, sources in the pilot community told PTI.

The sources said the full-service carrier has also told the employees that the compulsory one-year notice period for captains would be done away with.

The carrier, which has more than 16,000 employees, said it is implementing several measures to cut costs.

Jet Airways Chairman Naresh Goyal, CEO Vinay Dube and Deputy CEO Amit Agarwal, among others, were present at the meeting, the sources said.

At the meeting, the management also said that the airline might be left with revenues only to operate for not more than 60 days unless cost-cutting measures are implemented, the sources added.

In a filing to the BSE, the airline said it is implementing several measures to reduce cost as well as realise higher revenues, for desired business efficiencies.

“Some of these areas include sales and distribution, payroll, and maintenance, among many others,” it added.

Jet Airways’ filing came in response to a clarification sought by the BSE on reports that the airline might not to able to fly beyond 60 days amid financial woes.

In a message to the employees, Jet Airways CEO Vinay Dube expressed confidence that various transformation initiatives would help in addressing the current issues faced by the airline and the industry.

Prior to that, Dube, in a statement to the media said that the aviation industry is passing through a tough phase due to a mismatch between high fuel prices and low fares.

As per the filing, the company has been in dialogue with its key stakeholders, including pilots and engineers, to apprise them of the challenges being faced by the Indian aviation sector in general and the airline in particular.

This is to “enlist their full support and cooperation for realising necessary savings across all functions of the business”, it added.

The Naresh Goyal-led airline, in which Gulf carrier Etihad holds 24 per cent stake, has already slashed by 25 per cent the salaries of its senior management, sources had said on Wednesday.

Senior management executives are those holding general manager post and above level positions.

Pilots, as well as engineers, have rejected the pay cut proposal, the sources said.

In his message to the employees, Dube said that in the current environment, the rupee has depreciated and airfares have not yet caught up with the run-up in fuel prices and described it as the biggest short-term challenge.

Noting that several measures are being taken to have a “more competitive cost structure”, Dube in his message said the airline is well on track to reduce the non-fuel unit costs by 12-15 per cent.

“For 25 years we have shown a combined resolve and resilience to overcome one challenge after another. Going forward we will once again overcome this as a team,” he said in the message.

The firm order for 225 B737-MAX planes is a testimony to the growth ambitions, Dube said in his message, adding that 11 such aircraft would be inducted into its fleet this fiscal.

“However, we are not counting on growth alone to shape our future – we will do much more than that,” he said.

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