IndiGo scraps leave without pay for staff, says 70% pre-Covid level reached

Topics IndiGo | IndiGo crisis

In June IndiGo had implemented a mandatory leave without pay program for 1.5 days to 5 days
In an apparent sign of recovery of the aviation sector from the Covid-19 pandemic, India’s largest airline IndiGo has eliminated Leave Without Pay (LWP) for all employees which was introduced since April to control costs.

The airline took this decision on a day when the government has allowed airlines to utilise 80 per cent of their pre-Covid capacity as the number of passengers taking the flight continues to climb.

“At this point of time, it looks like we are on a path to a graduated and measured recovery. In anticipation of the improved revenue that I know we can deliver, we are removing the Leave without Pay across all departments from 1 January 2021,” CEO Ronojoy Dutta wrote to employees.

Domestic air traffic jumped the most since the lockdown, with a month-on-month growth of 33 per cent in November.

In June IndiGo had implemented a mandatory leave without pay program for 1.5 days to 5 days. Subsequently, in July, IndiGo announced 5.5 additional days of LWP for its pilots, taking the effective number of LWP to 10 days.

As cost cutting measure, the airline had also let go of 10 per cent of its employees and implemented a pay cut across the board.

Dutta said that he expects the government to remove curbs on capacity utlisation by early next year, however he says that the outlook for international traffic continues to remain challenging. “While we are not out of the woods, we are certainly moving in the right direction,” he wrote.

Company sources said that, as the airline is utilising more of its aircraft as it sees a growth in demand. In the second quarter, IndiGo had a capacity utilisation of over 30 per cent, and ended it at 47 per cent, much above its peers.

On Wednesday, IndiGo said it has reached 70 per cent of its pre-Covid capacity and is operating 1,000 daily international and domestic flights. India resumed domestic passenger flights on May 25 after a gap of two months due to the coronavirus-triggered lockdown. At the time of resumption, the government had allowed airlines to operate not more than 33 per cent of their pre-Covid domestic flights.

CEO Ronojoy Dutta informed during the post-results analyst call in October said that the airline’s focus will be on aggressively expanding its domestic capacity.

He had signalled that the company will be calling back its employees as capacity utilisation improves. However, CFO Aditya Pande said that the airline will keep salary costs 30 per cent lower than its pre-Covid-19 levels, meaning pay cuts for employees will continue for some time to come.

IndiGo has not deferred its aircraft induction plan and has added eight new aircraft during July-September period. However, it has also retired around 10 older aircraft in order to bring down maintenance cost. At the end of 30 September, IndiGo had a cash balance of Rs 20,400 crore out of which Rs 8,900 crore is free cash.

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