BackAirlines look to plug executive flight
Low-fare airlines such as SpiceJet, IndiGo and others are in the process of raising salaries, especially for pilots
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Mumbai: A string of top-level exits in the last one year has left domestic airline companies, including the likes of Jet Airways (India) Ltd and SpiceJet Ltd, scrambling to hire senior managers from foreign airlines, in addition to hiking salaries to retain key employees.
As many as 15 top-level executives, five of whom were chief executive officers (CEOs), have exited Indian airlines in the last one year. Some quit within months of coming on board.
Jet Airways, SpiceJet and Go Airlines (India) Ltd that runs GoAir have suffered the most from the executive flight, not to mention the grounded Kingfisher Airlines Ltd.
Jet Airways, SpiceJet and Kingfisher Airlines are all currently operating without a CEO.
Spokespersons for these airlines said they had already started the process of finding replacements.
High operating costs, intense competition and slowing passenger traffic growth in the face of an economic downturn have hurt the airline industry. Kingfisher was grounded in October 2012 amid labour trouble. Air India Ltd, Jet Airways and SpiceJet are expected to post combined losses in excess of $1.2 billion in the year ended 31 March, according to consulting firm Capa Centre for Aviation.
The absence of sufficient independence for executives to take decisions and the highly regulated nature of the airline industry, which reduces the leeway for decision making, are key reasons for the churn in management, said Sandeep Chaudhary, CEO at Aon Hewitt Consulting in India.
“There is little capability domestically so the airlines seek international talent," he said.
What does not help is the pressure exerted by the downturn in the industry on executives.
The pressure is the worst at low-fare airlines such as SpiceJet and GoAir, said K. Sudarshan, managing partner, EMA Partners India, an executive search firm.
“Low-fare carriers cater to the price-sensitive population and have not much elasticity in pricing. There is high pressure on the senior executives as there is little room to cut costs, and the typical fall boys are the commercial staff," said Sudarshan.
To be sure, airlines have had some success in fresh hiring.
Jet Airways, for instance, is likely to name Air Seychelles’ former CEO Cramer Ball as its next CEO, according to two people aware of the plan, who requested anonymity.
Fares Azeem Kilpady joined SpiceJet as vice-president and head of revenue management from Malaysian rival AirAsia Bhd in March. SpiceJet also hired Kaneswaran Avili from Singapore’s Tiger Airways as its chief commercial officer in March.
Foreign executive talent comes at a higher cost for the airlines.
“When talent comes from other countries, those salaries tend to be 25-40% higher (than salaries for domestic talent) for critical skills. This is because they are filling a gap in the talent market, and bringing something you don’t have," said Chaudhary of Aon Hewitt, adding that the opportunity to be part of an emerging market is also a big draw for executives who take the bait.
“Executives are chasing opportunities rather than location. Moreover, it is not like other markets are booming," said Chaudhary.
The churn is not limited to senior executive levels. Attrition among pilots and technical staff is also expected to gather speed, with two new airlines preparing to start operations.
AirAsia is readying to launch a low-fare carrier and Singapore Airlines (SIA) a premium airline, both in joint ventures with the Tata group.
“Tata-SIA and Tata-AirAsia are also in the market for the right people. It is going to be a tough phase for airlines as they have to master the art of getting and retaining the right talent," said a director of a low-fare airline. This person didn’t want to be named.
With Tata-SIA launching operations using the Airbus A320s, it is likely to source most of its technical workforce such as pilots and engineers from IndiGo, Air India and GoAir, which use the same aircraft.
To keep competition at bay, low-fare airlines such as SpiceJet, IndiGo and others are in the process of raising salaries, especially for pilots. SpiceJet has hinted at salary increases in an internal communication reviewed by Mint.
While the entire industry is struggling with attrition, Jet Airways in particular has also lost key management members because of cultural differences between its staff and that of Etihad Airways PJSC.
Since Jet Airways sold a 24% stake to Etihad Airways in April last year, in a transaction valued at around ₹ 2,058 crore, it has witnessed the exit of eight senior executives.
“It was like two major operational softwares that cannot talk to each other," said a senior executive at Jet Airways who recently quit. “Things were simply not working. Etihad Airways had its own agenda and Jet Airways has a different agenda. So the best thing is to jump out of ship," he said, requesting anonymity.
Industry experts, however, see this churn as part of an evolving industry. “We will continue to see these kind of exits till the industry stabilizes, much like what we saw with the telecom sector," said Sudarshan.
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