Jet Airways joins SpiceJet, Vistara, starts variable pay to save wage bill

Jet Airways is introducing 15-20 per cent variable pay component for its top management as it looks to save on its wage bill.

The Mumbai-headquartered airline has a higher cost structure than other listed domestic airlines and is undertaking cost control exercises to remain nimble. The variable pay scheme will be applicable to around 100 senior executives of Jet Airways and is expected to result in annual savings of Rs 25-30 crore, an airline source.

While the fixed salary component will be 80-85 per cent, the remainder will be linked to employee performance and airline profitability. The senior executives will also not receive salary increment this year.

A Jet Airways spokesperson did not offer immediate comments.

Some of Jet’s peers already have a variable pay scheme in place. Vistara and SpiceJet too have variable pay for its senior management. Air India a productivity linked incentive scheme which was a variable pay out in mid-1990s but the same was discontinued in 2012.

Jet Airways has a staff strength of around 15,000 and had a wage bill of Rs 2,316 crore in the first nine months of FY 17. Employee costs rose 26 per cent on a year on year basis for the period. The airline has around 2000 pilots on its rolls whose salaries account for nearly half of the wage bill.

It clocked profit for seven consecutive quarters but earnings have come under pressure due to increasing costs. In the third quarter consolidated profit fell 66 per cent to Rs 156 crore on a year on year basis. Jet’s unit cost which is cost incurred for flying a seat per kilometre is also higher than IndiGo and SpiceJet. One of the reasons for the same is the mixed fleet the airline operates. Jet flies both narrow body and wide body planes and a large international network.

“We are looking at various ways to control costs and improve efficiencies like increasing utilization of the Boeing 737 aircraft,” the airline source. While fuel is the largest cost component for Indian carriers there is little that they can do except introducing steps for optimal fuel burn.

The management’s move to prune salaries is causing discomfort amongst the airline top brass. Some are questioning the move as the management hiked salaries of engineers a few months ago. “There is a clear paradox when it comes to cost cutting,” an executive quipped.