Air India has been operating at a loss for quite some time now. Air India management is not ready to negotiate with the pilots on the salaries in-spite of a crippling strike.
To further investigate the logic, I have performed a quick and dirty analysis of the labor costs of Air India and compared it to the industry average in the US. Of-course, the economic conditions and the maturity of the sector in the two countries are totally different. However, the analysis threw up some interesting facts. Below is an excerpt from the income statement (INR) of Air India for the year 2009-2010.
Source: Air India Annual Report 2009-2010
If you will observe, fuel costs are a major component of Air India's costs. This is not in Air India's control and both airlines in the US and India suffer from the same fluctuations and hikes in fuel prices. The tables below give the labor cost as percentage of total operating costs. The figures for Air India have been converted to USD at INR 44 = 1 USD.
Source: Annual Reports of Continental, Delta, American, US Airways and Southwest for 2009-2010
The figures for Air India and the US industry average are almost the same when fuel cost is taken into the final Total Operating Cost. When fuel cost is taken out of the equation, the difference in even more. So, my question is why is Air India management playing hardball with the pilots when it should be concentrating on turning around the airline, something it can't do without its labor force which includes pilots?
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