Lay off vs Pay cut: A Major Strategic Decision for GoAir

Pages: 459-461
Sona Raghuvanshi (Amity Global Business School Mumbai)

Starting in 2005 as a budget carrier, GoAir had smooth sailing in tough Indian aviation market. Positioned as a conservative but consistent airline GoAir was focussed more on generating profit than capturing the market. With the aim of raising funds for expansion, the low cost carrier had plans to come up with its IPO in the year 2020. But since last year, situation had become challenging for the airline due to multiple issue ranging from rising fuel cost, shortage of pilots, delayed delivery of aircraft from the airbus manufactures, engine issues and unstable leadership. The situation became more serious in the recent months due to absence of revenue earning caused by travel restriction on account of global pandemic. The airline had no other option, but to take several cost cutting measures to stay afloat. Starting with termination of the contracts of expat pilots to sending employees on temporary leave without pay, the GoAir top management also took major pay cuts. GoAir’s promoters continued to seek financial assistance with the government so as to improve the position of employees and safeguard airline from being grounded. GoAir also had rounds of talks with banks, lessors and suppliers for the same purpose. Now, the CEO of GoAir is in tight situation as he is given the task of coming up with a survival plan for the airline. He is in tight situation as he has responsibility towards employees in paying compensation to them when cash inflow is badly affected and on the other hand, keeping the airline alive in the current scenario. Even after withdrawal of restriction, social distancing and hygiene concern will not allow it to operate in its fullest capacity for few months. What would be the survival plan in this situation? Would it be possible for GoAir to keep people in payroll, paying salaries and wages amidst travel restrictions or would it resort to layoff in order to survive? Or would there be a new compensation structure to retain critical talent? What steps would the airline take to show its investors, customers and the government that it cares about them?