IndiGo to cut 10% workforce to control impact of Covid-19 pandemic

We are flying only 30 per cent of our capacity and carrying the costs of a much larger airline,” said Ronojoy Dutta, CEO, IndiGo
IndiGo, the largest airline in India, will shed 10 per cent of its workforce as the airline scrambles to control the impact of the pandemic.

The airline, with more than a 50 per cent market share, is one of the largest job creators in the Indian aviation industry owing to its size.

According to the latest data, which is till the end of FY19, the airline had 23,531 employees on its payroll.

The affected employees of IndiGo will be paid a severance pay of up to three months, gratuity, bonus, and medical insurance.

“The long-term stability of our company requires us to take some near-term cost reduction measures. We are, therefore, for the first time in our history, initiating a layoff programme, impacting 10 per cent of our workforce,” Chief Executive Officer Ronojoy Dutta said in an email to the airline’s staff.

The cuts are needed because the pandemic is still hitting demand for flights, Dutta told the employees on Monday.

“We are flying only 30 per cent of our capacity and carrying the costs of a much larger airline. Even the most optimistic scenario would take us up to at best 70 per cent of our capacity by the end of the year. It would be irresponsible of us not to try and bring the two into closer balance,” Dutta wrote.

The airline had earlier initiated a paycut and leave without pay for its staff, which was up to 30 per cent of the salary for some employees.

“Unfortunately these measures are not enough to offset the decline in revenues,” Dutta wrote in the email.

While the government resumed air transport on May 25, quarantine norms in various states, extensions of lockdown in some states, and a fear of flying hit airlines’ revenues.

In June, they struggled to fill 55 per cent of their seats.

“Most of the demands are unidirectional, which is from metros to a few cities. A fresh surge in the number of Covid cases is impacting demand,” an executive of a private airline said.

Sanjay Kumar, IndiGo’s chief strategy and revenue officer, said recently: “Inconsistencies in rules and regulations followed by state governments are keeping passengers away.”

The International Air Transport Association had warned last week that growth in Covid-19 cases was likely to harm the recovery of air travel. According to a report by CRISIL, Indian airlines will face a revenue loss of Rs 1.3 trillion between FY20 and FY22 due to the pandemic.

Airlines are unlikely to recoup this and bounce back to pre-pandemic levels of double-digit growth at least in the medium term, said the report.

With no signs of financial assistance, airlines have been forced to restructure their payrolls while negotiating other costs with aircraft lessors, vendors, airports, and oil-marketing companies.

Other private airlines have sent their staff on leave without pay, with most extending it every month. While GoAir has put the bulk of the employees on leave without pay since April, SpiceJet, along with furlough, is paying employees based on work hours.

State-owned Air India has embarked on a cost-cutting drive, which will see around 600 employees sent on furlough for up to five years.

Urban unemployment, having fallen for four straight weeks, has reversed course and risen in the week ended July 5, in step with the renewed lockdown in parts of India, according to a survey by Centre for Monitoring Indian Economy (CMIE).

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