Coping with Turbulent Times in the Indian Aviation Industry
The case is about the retrenchment drama that unfolded in one of India’s leading aviation companies, Jet Airways (India) Limited (Jet), in late 2008. After showing the door to more than 1000 employees in a bid to streamline its operations, Jet was faced with immense criticism and opposition by various organizations and political parties.
Jet’s chairman Naresh Goyal (Goyal) reinstated the employees a day later saying that he was not aware of these sackings. The Indian aviation industry was going through a tough phase and experts felt that it was in the interest of the company to retrench employees to remain competitive.
Experts largely felt that Goyal had capitulated under pressure from external parties while others felt that all may not be well with the organizational communication mechanisms at Jet.
We have created high morale for our people. Our employees believe in the company. They believe it’s their company. There’s a feeling among employees that if the company makes money, it’s their money and if the company loses money, that’s their loss."
Naresh Goyal, Chairman, Jet Airways (India) Limited, in July 2007.
"While the mishandling of the Jet Airways sacking and reinstatement of 1,900 employees was an HR and PR disaster, the larger implications of what happened are also worth considering. It is not just that the chairman of India’s most successful airline became the butt of jokes, it is also a question of what he knew, when he knew it, and who did the bungling."
- Anjuli Bargava, Columnist, Business Standard, October, 2008.
"The sackings were completely illegal. There was no notice nor was government’s permission taken to sack 800 employees. Perhaps they realized their folly and decided to take these employees back. The matter would have landed in the court otherwise."
- Anand Pujari, Labour lawyer, SI Joshi & Co., in October 2008
» Analyze the HR problems faced by Jet Airways in 2008.
» Discuss various concepts related to hiring, firing, and compensation management.
» Understand the rationale behind Jet’s decision to lay-off employees and the reason’s behind its later decision to take back the sacked employees.
» Understand the importance of communication in an organization and analyze whether there were any loopholes in Jet’s organizational communication network.
» Understand the rationale behind the pay cuts initiated at the company.
» Understand how environmental variables could affect a company’s HR policies.
In October 2008, Jet Airways (India) Limited (Jet), one of India’s leading domestic airlines, decided to lay off more than 1,000 employees to streamline its operations.5 The retrenchment was the second phase of its trimming operations.
The first phase, which took place a day earlier, saw the airline showing the door to 850 cabin crew members6. The second phase of retrenchment included employees from all operations - cabin crew, pilots, ground staff, airport services staff, and employees from management departments.
The sudden decision not only took the employees by surprise but also caused alarm in the Indian aviation sector. Amidst great furor and opposition by various organizations and political parties, Naresh Goyal (Goyal), chairman of Jet, reinstated the employees a day later amidst great emotional drama. He was quoted as saying he had been appalled by the retrenchments of his employees, which he claimed, he had come to know only through media reports.
He added that he would "not be able to live as long as he lives" with the tough decision his management had taken and clarified that he was taking back the employees as they were "family to him and as head of the family he would take care of them.
A month later - in November 2008, Jet announced that it would consider serious salary cuts for its staff to handle the aviation crisis.
While many industry analysts were surprised by the turn of events that had led to the reinstatement of the sacked employees, they opined that Jet had been forced to take drastic decisions such as laying off employees or initiating pay cuts because of the turbulent phase through which the aviation industry was passing.
In September 2008, the International Air Transport Association (IATA) had predicted that world over the aviation industry would lose about US$5.2 billion based on an average jet fuel price of US$140 . The rise in fuel prices had pushed the fuel bills of the aviation industry to US$186 billion by the end of the year 2008.
Jet, with its headquarters in Mumbai, India, began as an air taxi operator in April 1992 and started its commercial operations a year later, in 1993. It operated with just 24 flights across 12 destinations initially, but showed exceptional growth with more than 357 daily flights to about 62 domestic and international destinations in 2008. It was first listed in the National Stock Exchange (NSE) in the year 2005. As of June 2008, it operated over 370 daily flights to about 68 destinations both in India and abroad including San Francisco, New York,Toronto, Singapore, Brussels, London (Heathrow), Hong Kong, Shanghai, Kuala Lumpur, Colombo, Bangkok, Kathmandu, Dhaka, Kuwait, Bahrain, Muscat, Abu Dhabi, Dubai, etc...
HR Issues, Management and Decision Making at Jet
According to the company, Jet paid the utmost importance to the composition of its senior management and its human resources with emphasis on teamwork as a key success factor. Being in the service-based industry, Jet gave priority to high quality, professional service to its customers...
The Retrenchment Drama Unfolds
The retrenchment drama unfolded on October 16, 2008, when Jet announced that it would lay off nearly 1,100 of its staff a day after it had already laid off around 800 of its cabin crew members.
The second phase of 1,100 employees included those from departments like management, flight attendants, and the cockpit crew.
The company decided to lay off these employees with no prior notice but offered them a month’s remuneration...
Reasons for Retrenchment
The growing challenges in the Indian aviation industry were the main reason for the lay offs at Jet, according to the company and other industry analysts.
Turbulent Times for the Indian Aviation Industry
The Indian aviation industry was one of the fastest growing aviation industries in the world. The Air Corporations (Transfer of Undertakings and Repeal) Act 1994 opened the Indian skies up to private operators. Apart from government-owned airlines, the aviation industry was flooded with private operators and low cost carriers...
The Debate Leading to the Reinstatement of Employees
Jet received criticism from several quarters for retrenching its employees. Many of its employees protested against the decision to oust them without prior notice. Most of them had paid substantial amounts to receive training at major Aviation Training institutes...
Massive Salary Cuts Follow
In the last week of November 2008, Jet decided on a 20% cut in the salaries of its pilots, engineers, and some other staff. The company planned a 5 percent to 10 percent cut in the salary of top officials who drew a salary above Rs. 75,000...
End of Case.
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