Government intervention ends Air India strike

Senior pilots at India's ailing national carrier called off their disruptive four-day walkout yesterday, after the government overrode the management's plan for a steep cut in wages for the best-paid employees.

New Delhi's about-face on the cost-cutting measures came after hundreds of senior pilots took mass sick leave, forcing Air India to cancel scores of flights and suspend new bookings for two weeks, creating chaos at airports during a busy travel season.

But while airline passengers expressed relief at the end of the agitation, Air India's troubles are far from over. With accumulated losses of around $3bn - including at least $875m last year - the carrier had been ordered to develop a credible turnround plan as a precondition for receiving a fresh infusion of government funds.

"The fundamental problem is not resolved," said Kapil Kaul, chief executive for India of the Centre for Asia Pacific Aviation.

"The current cost structure of Air India is untenable. I am not very sure what happens now. It will be very unfortunate if the management actually withdraws its cost-cutting."

Mr Kaul said Air India, with 32,000 employees, has about twice as many employees as it needs to run its operations.

Air India said last week it was going to reduce "productivity linked incentives" for 7,000 of its best-paid employees - including senior pilots and managers - by up to 50 per cent.

The decision was part of a broader effort to cut costs, which Air India has described as "imperative for insuring the survival of the airline" given its financial difficulties. But the cuts triggered a furious reaction from executive pilots and others, for whom the allowances account for around 50 per cent of their pay.

Praful Patel, the civil aviation minister, declared on Tuesday that the decision to cut incentive payments had been put on hold, and that any cuts would be decided in consultation with the pilots.

After the industrial action ended yesterday, Mr Patel announced his ministry would set up a panel to consider the incentive payments. However, the turbulence has fuelled intense public debate over the carrier's future.

"There are no obvious solutions for Air India within the ambit of state ownership," the Economic Times said this week.

"The best solution in the current context is for the government to not throw good money after bad, [but] rather extricate itself completely from the mess."

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