BQ Conversations: Akasa Air CEO On The Pilot Row
#BQConversations: #AkasaAir clears the air on why they took pilots to court. Is a six month notice period fair?
CEO Vinay Dube answers this and more, in conversation with Tamanna Inamdar. #BQLive
CEO Vinay Dube answers this and more, in conversation with Tamanna Inamdar. #BQLive
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00:00 Akasa has been in the headlines in the recent past, primarily for taking some of its pilots
00:20 to court.
00:21 Now, there is a rule that co-pilots and captains have to serve from six months to one year
00:27 notice once they decide to move on to another airline.
00:31 And this rule is what Akasa has been trying to enforce in court.
00:36 It's led to quite a bit of debate.
00:39 Is that six months or 12 years, 12 years in the case of captains, fair?
00:43 Is it enforceable?
00:45 Is it just something between the airline and the employee?
00:49 Or is it also telling us about the great demand for pilots right now as capacity is built
00:55 in Indian aviation?
00:57 I'm sitting now today with Vinay Dubey, he's founder and CEO, and he is going to clear
01:03 the air, Vinay.
01:04 Is that what we're going to do today?
01:05 Absolutely happy.
01:06 Okay, so let's start with, why did you have to take them to court?
01:11 Was it such a big hit to the operations of your airline that when pilots quit, and I
01:18 believe up to 10% you could, you know, tell me if that's correct, 10% of your force, what
01:23 happened and why has it led to a courtroom battle?
01:27 Got it.
01:28 So thank you.
01:29 I will give you all of the backstory because it needs to be well understood.
01:33 So first and foremost, this rule that requires pilots to have a contractual notice period
01:40 has been around for, you know, maybe 15 plus years.
01:44 And this was a civil aviation regulation that our regulator came out with, I think it was
01:49 2006.
01:50 And so this has been around, this is not anything new, this is not related to new demand, new
01:56 pilot shortage, nothing.
01:57 This has been around, like I said, since 2006.
02:00 Now, it's also important to understand why this rule was put in place by our regulator.
02:08 And for that, I'll take you back to an unpleasant time, which we'd all like to forget when we
02:13 are locked up in our societies and our buildings during COVID times, you'll remember that.
02:18 And the people that were actually allowed to leave the buildings were people in the
02:21 medical services and hospitals and nurses and doctors, or people, you know, police and
02:27 fire and ambulance, those kinds and airlines.
02:30 Journalists as well.
02:32 Journalists as well.
02:33 Journalists as well.
02:34 Right.
02:35 So there were people that were termed essential services.
02:38 You know, they were so important to nation building, they're so important to the running
02:42 of the country that they were termed essential services.
02:46 And pilots are an extremely important element of the airline.
02:51 And it's with that background that this rule has been created.
02:55 Because if a pilot leaves, calls you at 10 o'clock at night and says, sorry, I'm not
03:00 coming tomorrow morning, it is extremely disruptive.
03:04 You leave passengers stranded at the airport.
03:07 And so it's with that background that these rules are put in place.
03:10 And it's not just for a casa, it's for our customers.
03:15 It's for the fact that customers shouldn't be left stranded.
03:20 And yes, when a small group and by the way, you know, the overwhelming majority of pilots
03:27 understand this responsibility.
03:29 So I don't even want to portray it as though this is a pilot issue, not at all.
03:34 The overwhelming majority of pilots really understand this responsibility and take their
03:39 responsibility extremely seriously.
03:42 It's a small group that decided to do something that is just completely unprecedented.
03:47 May I just ask, you talked about essential services, understood, you gave an example
03:53 of a pilot saying at 10 in the night, I will not come tomorrow.
03:56 That's one extreme.
03:57 The other extreme seems to be a one year notice.
04:01 Is there nothing in between which would also give the pilot or the captain in this case,
04:08 a right to choice of employment?
04:11 Absolutely.
04:12 So in a casa's case, it's six months, you talked about, you know, no notice period and
04:17 12 months and you know, is there nothing in between?
04:20 Six months is pretty long as well.
04:22 So Tamanna, this is where, you know, I would ask you to go back and if you are a software
04:30 programmer at TCS, you're a chartered accountant at Ernst & Young and you can take any job,
04:37 three months is a reasonably standard notice period for people in multiple jobs.
04:43 Six months for us in this particular type of essential service for a job that really
04:50 has a long training footprint in our view is not unreasonable, right?
04:55 Because pilots have a training footprint.
04:58 You can't create a pilot overnight, right?
05:01 You need time to create a pilot and at a casa, we have contingency plans.
05:05 We've got a 10 year plan for pilots.
05:07 That's how long one needs to plan for pilots.
05:11 You really have to have a very, very detailed plan, especially if you're growing like us,
05:16 right?
05:17 And we're back in growth mode and we've always been in growth mode.
05:19 And so you need a very detailed plan.
05:21 And our view is that six months is actually a reasonable amount of time that allows passengers
05:28 not to be stranded, right?
05:31 As well as for pilots to be able to choose the trade that they want and go to companies
05:36 that they want.
05:37 So the question that has been asked is that when ACASA started onboarding pilots, did
05:45 all of them serve six month notice from the places they came?
05:49 Because you also came into being in very turbulent times.
05:54 Some of what was happening in the pandemic also helped you with acquisition of aircrafts,
05:58 et cetera.
05:59 And the same with pilots as well.
06:02 Everyone didn't serve a six month notice before coming to you.
06:05 So let me clarify that as well.
06:07 We at ACASA have the highest standards of governance.
06:11 I want to put that right up front.
06:13 And this is not just the letter of the law.
06:15 This is the spirit of the law.
06:18 And at ACASA, our stated policy, as well as what we take pride in implementing, is the
06:25 fact that we will not take anybody without a notice period unless...
06:32 Anybody who's not served their full notice period unless...
06:36 And I'll be very particular about this because one needs to understand what the unless is.
06:41 Unless there's been both a substantial and sustained violation of their contract by their
06:51 employer.
06:52 Okay?
06:53 Both substantial and sustained, as in sustained over months.
06:59 And so the reason I'm saying that was because when we hired pilots, they had 20% cuts during
07:06 COVID over months.
07:08 Now, when you are an employee and you've got a 20% cut over months, well then that particular
07:15 employer can't just say, "Sorry, I've unilaterally cut your salary by a substantial amount and
07:21 over sustained periods."
07:23 But still you have to follow all the other parts of the contract, even though I'm violating
07:28 this one, which is substantial and sustained.
07:31 So did we take anybody without a notice period?
07:35 It's only under those circumstances.
07:38 And in fact, when we hire pilots, we get them to sign a declaration.
07:44 And by the way, which says that they're not violating any contractual notice period, that's
07:48 it.
07:49 But we also do our test on top of that.
07:52 It's not that we just get them to sign a piece of paper, but we actually do our investigation
07:56 on top of that in terms of when they're coming from and have they been subjected to these
08:01 kinds of unilateral cuts over long periods of time.
08:05 The minute the COVID cuts were eliminated and pilots got back to their contractual salaries,
08:14 we never took anybody without violating this.
08:18 And the same thing applies to us.
08:19 I mean, if we unilaterally cut our pilot salaries by 20% over a six month period, we have no
08:28 right to say, "Sorry, you have to still serve your six month notice period."
08:31 But that is your own internal rule.
08:34 The rules that you're referring to, which have a six month and 12 month notice period.
08:39 Six month only.
08:40 Okay.
08:41 I'm talking about the, you're saying the civil aviation rules that apply to everyone, which
08:44 have this notice period in law, don't have any conditionality attached to it.
08:49 No, the current law, as was adjudicated by the Delhi High Court, is that they are subject
08:58 to following the airline's contract.
09:05 Very clear.
09:06 Whatever that may be.
09:07 Whatever that may be.
09:08 In our case, it's six months.
09:10 But if the airline themselves is rendering a contract null and void by making substantial
09:17 and sustained changes to it, then the pilots should be within their rights to actually
09:27 make the decisions that they want to.
09:30 Even so, yes, you went to court.
09:33 You have said that this has harmed us.
09:37 I will be asking you how exactly.
09:39 And harmed customers.
09:40 And harmed customers.
09:42 But to say that now you have to pay me 21 crores, including a substantial, I mean, 14
09:49 crores per pilot for ruining the reputation or impacting the reputation of the airline.
09:57 Was that a bit excessive, Mr. Dubey?
09:59 So Tamanna, what I will say, I won't talk about the exact numbers because this is a
10:05 matter that's in court and it's not fitting for me to talk about these.
10:10 But I will tell you, for the customers that we left stranded in July or in early August,
10:21 it was not good for them.
10:24 And that is what we were concerned about.
10:27 Was that as a result of someone calling you at 10 at night and saying, I'm not showing
10:31 up tomorrow morning, we had to cancel flights.
10:34 Now, what we did was we took longer term cancellations because we thought we would rather take the
10:41 hit on the revenue side and make longer term cancellations and run a hand to mouth network,
10:48 which is not good for customers.
10:50 So what we did was we took longer term cancellations in July and August and early September and
10:56 said, we'll take these.
10:58 We'll take them well in advance.
11:00 We'll refund the money back to our consumers just so you can operate a highly dependable
11:04 schedule.
11:05 And the good news for us right now is that we're back in growth mode.
11:09 So if you look at what we have published for March, it's a network that's 30 percent bigger
11:15 than what we're flying today.
11:17 OK, that's that's excellent.
11:18 But just to come back to the point, the counter from the other side is OK.
11:24 So if the cost of training is 36 lakhs or 50 lakhs or whatever the value of the bond
11:32 is that the employee signs on, that has been paid.
11:36 So what is this?
11:37 This sounds like a penalty.
11:39 Is this a warning to current employees and pilots?
11:42 No.
11:43 So let me clarify.
11:44 Let me clarify this, because people get this confused quite often.
11:49 There is a training reimbursement amount.
11:54 So this is something that all airlines have with all pilots across the world, which is
12:00 I'm spending so much on training.
12:02 And as a result of that, I would expect you to stay for a certain duration of time.
12:07 And if you don't, you will reimburse me this training amount.
12:11 That's for training.
12:13 But that has nothing to do with consumers.
12:17 That is purely between the airline and the pilot or the airline and the employee.
12:24 Over and above that is another clause that is consumer-centric that says, by the way,
12:29 you can't leave us for today, tomorrow.
12:32 You can pay the training amount.
12:33 You can pay five times the training amount.
12:35 But you can't leave with 24 hours notice or zero notice, because you're going to leave
12:40 consumers stranded.
12:42 These are two conceptually completely different things.
12:46 One is just between the pilot and the company in terms of a training reimbursement agreement
12:53 that is signed to stay for a certain duration commensurate with the investment that is made.
12:59 Nothing to do with safeguarding consumer interests.
13:02 And by the way, when the DGCA came out with their civil aviation regulation way back in
13:09 2006, it was to protect the interests of the consumers.
13:13 So I would request us not to get confused with these two things, which are very separate.
13:21 You have mentioned now a few times the example of a call at 10 in the night that they're
13:26 not coming the next day.
13:27 Is that what happened?
13:28 And did it happen in large numbers?
13:30 What really was the scale of people exiting which has elicited this response?
13:37 Absolutely, that's what happened.
13:39 That we would get a notice at 10 o'clock at night that says we're not coming.
13:43 Now not 100% of the people that left did in this manner.
13:48 But the vast majority of the 40 odd pilots that we're talking about left with less than
13:54 24 hours or 48 hours worth of notice.
13:57 So absolutely that was the case.
14:01 What was the impact?
14:02 Because now there is a bit of confusion out there.
14:05 Is that the reason that you have rationalized routes because of the pilots leaving?
14:12 Has that impacted your operations?
14:13 Were some stations shut down?
14:15 There's talk of Bengaluru, Chennai.
14:17 What exactly has been the impact?
14:19 So look, some of what was reported was something that we rationalized way back in June, which
14:26 was just regurgitated and reported again.
14:30 So I'll ignore that in terms of what happened in June or May when we had access to some
14:38 slots as a result of Go Air's shutdown.
14:41 There was something completely different.
14:43 But yes, in the late July and August time frame, there were enough pilots, although
14:48 it was a small number.
14:49 Just keep in mind we're at this point a small growing airline.
14:52 So a small number does have its impact, as a result of which we did have to pull down
14:58 the amount of flying that we do.
15:00 Again, the good news is all of that is behind us.
15:03 We took those decisions in July.
15:06 We took those decisions in very, very early August because we wanted to make sure that
15:11 we don't have customers that show up with one day, two days, five days, 20 days.
15:17 So we took this reduction in schedule all the way till mid-November, after which we've
15:23 started seeing an increase in the amount of flying.
15:27 Can you give me a bit of detail on this, on what flights, the number of flights and between
15:31 what routes have been curtailed?
15:33 Yeah.
15:34 So this is not something that we've made public, Tamanna.
15:36 And honestly, it's not something that is so important.
15:41 I would say that we continue to fly to 16 destinations as we had.
15:45 So we haven't closed the destination as a result of that.
15:49 We've pulled some frequencies and we've pulled.
15:51 So Bangalore, Chennai.
15:53 It's one of them, for example, but they're not a lot of these.
15:57 For the most part, we curtailed frequency.
16:00 For the most part, we curtailed frequency is what I can share with you.
16:04 But again, all this is behind us and we're back in growth mode.
16:08 We will come.
16:09 We can, sure.
16:10 Because that's important that all of this now you're saying is behind you, but you're
16:14 still 10% less of pilots that you had.
16:17 So are you now on boarding more?
16:20 So short, let me address that.
16:22 So at Akasa, we are a team of planners.
16:26 We are aviation geeks.
16:27 We've been, our whole careers have been spent in aviation and we've seen the ups and downs.
16:34 So from day one, we have been hiring pilots well in advance of our requirements.
16:42 And so we had 350 pilots or 330 pilots or so in April.
16:49 By September we had 450 pilots.
16:52 So again, even accounting for the pilots that left, we have continued to increase our numbers.
16:59 And today we have 450 plus pilots with another 125, 130 that have signed commitments with
17:07 us already.
17:08 So if you include the two, we are at 600.
17:10 By the way, you don't need close to 600 to fly 20 aircraft.
17:14 So the pilot hiring continued.
17:16 It's just that it takes a while to train pilots to be able to have them fly for their designated
17:24 positions and that training for multiple pilots is in place depending on when they were hired.
17:29 So today we're able to put online pilots that we hired in September of last year.
17:37 We're able to put online some pilots that we hired in January of this year.
17:42 We're able to put online some pilots that were hired in May of this year.
17:45 So this is not, and it's impossible to have a knee jerk reaction because pilots have a
17:50 long training footprint.
17:52 And notice periods to self elsewhere.
17:55 But six months, correct is the notice period that we have.
17:58 So just one point on what's happening in the industry with more aircrafts coming on board,
18:04 more players coming on board.
18:06 I think it's not a big secret where your pilots are going.
18:10 And that fight for talent you think will continue with the way Indian aviation, especially domestically
18:18 is exploding.
18:20 So I'll keep my answer focused on pilots, given that's your line of questioning.
18:28 So if we were to fast forward to 2030, when the industry is of a much larger size, but
18:38 these aircraft orders are still coming in.
18:42 At that point in 2030, the country has a need for about 1500 pilots per year.
18:51 As a nation, we create 1.5 million engineers every year.
18:58 So as a nation, there's no shortage of talents.
19:01 1.5 million engineers are created in India.
19:04 What is 1500 pilots when it's an incredibly high paying job?
19:12 So with good planning, this is nothing.
19:16 We can create not 1000, we can create 5000 pilots a year and supply pilots to all our
19:21 neighboring countries as we supply engineers and mathematicians and technicians and computer
19:27 scientists to every part of the world.
19:31 That's the capability of our country.
19:34 So I don't see this as a problem at all.
19:36 You just need to be planners and plan well in advance, as we hope we are at the Tesla.
19:42 Let's come to the airlines plans going forward.
19:45 We're going into, I think, a very important period for tourism and the aviation industry.
19:52 Demand grows, you're entering your festive end of the year kind of season.
19:57 What really are your plans to ramp up capability and on international sectors as well?
20:03 Yeah, so first, in terms of ramp up, thanks to aircraft delivery, we should have a couple
20:09 more by the end of this year, we should exit the year with about 25 aircraft.
20:13 We'll exit the subsequent financial year with double our fleet today, so over 40 aircraft.
20:21 So we're back in growth mode.
20:22 It's very, very exciting.
20:23 And other than growth, the other part is international flying.
20:26 We were awarded traffic rights recently, we're extremely excited.
20:31 People always ask, what's the first international destination?
20:34 My view is we're not looking at the first, we're looking at the first, second, third,
20:38 fourth, multiple destinations, because we think this is profitable flying.
20:45 And it's profitable flying that we want to partake in.
20:47 And so I'd say, as we exit this fiscal year, you should see our first international flight.
20:53 But I think what we are focused on is not just the first one, but the first half a dozen.
20:57 So where are we flying to?
20:59 So it's going to be at this point a choice between Riyadh, Jeddah, Doha, Kuwait, these
21:04 are some of the traffic rights that we've been given.
21:08 And these are, you know, some of the most profitable flying that you have out of India.
21:13 So it's very exciting for us.
21:16 Are you seeing fares going up again?
21:19 Obviously, seasonally, they do.
21:21 But you also have crude really fluctuating going up once more because of what's happening
21:27 in West Asia.
21:29 Do you see that impacting your final prices?
21:33 So I would say a few things.
21:35 One is that at Akasa, we have the most modern generation and the youngest fleet probably
21:42 in the world.
21:43 Right, this the aircraft that we've got is brand new.
21:46 And it's the most modern generation aircraft, most fuel efficient aircraft.
21:50 So first at Akasa, we have the capability more than really any other airline in the
21:54 world to be able to address the ups and downs of fuel price.
21:59 That's one.
22:00 But the second thing is if you look at the response that came out from one of the market
22:05 leaders in terms of fuel surcharge, clearly, there is a move for the industry towards profitability
22:11 that we are seeing.
22:14 And so I think you continue to see ups and downs.
22:17 Is that something you would consider similar or a fuel surcharge to that extent?
22:21 Or you'd wait and see how customers and passengers are accepting it?
22:26 So Tamanna, I can't signal just to be very clear.
22:29 It is not legal for me to provide me signaling on price.
22:34 And I can't do that.
22:36 I just say that prices in India are both consumer friendly.
22:41 But I think based on what we are seeing, it clearly is an indication from one of the market
22:46 leaders that they're also focused on profitable growth.
22:50 And I would say at Akasa, we are focused on profitable growth ourselves.
22:54 We're not chasing market share.
22:56 There's no particular share number.
22:58 We want to build an airline that our grandchildren can fly on.
23:01 We want to build an airline that's around for 50, 100 years.
23:04 And for that, you need to plan long term and you need to plan for profitable growth.
23:07 And that's what we're focused on.
23:09 So when you say that you're back in growth mode, are these July, August, September problems
23:17 behind the airline?
23:19 Are those routes back or will they be back soon?
23:21 You said November onwards, everything is fine.
23:24 What do you mean when you say you're back in growth mode?
23:26 Sure.
23:27 So when I say we're back in growth mode is that we decided to reduce our network to a
23:34 number that we could comfortably and reliably fly as a result of some of our pilots leaving.
23:41 And for that, we had to reduce the amount of flying.
23:44 We decided to do that because we thought dependability was much more important than chasing profit.
23:49 Profitability in the very short term, because when you're dependable for your customers
23:53 and reliable for your customers, that's what creates long term customer satisfaction and
24:00 that pays off in the long term.
24:02 So we reduced the amount of flying in the July, August and September time frame.
24:07 And as our pilots, because as I told you, we've planned and hired many more pilots.
24:12 We've hired in our system probably twice the number of pilots than it takes to fly 20 aircraft
24:19 because we're planning for the long term.
24:21 And so as these pilots start coming online and as we start getting aircraft deliveries,
24:26 you'll see our network rise again.
24:28 And when I say you'll see, you can see it in the published schedule.
24:31 And this is the reason why I say that we will exit this fiscal year with a network that's
24:37 30% larger than what we're flying today.
24:39 May I ask what's your internal timeline to being, I think the next milestone or aim would
24:47 be the third largest player.
24:49 You have a consolidation with the big two.
24:53 And then of course, you saw what happened with Go, etc.
24:56 I assume Akasa would be aiming to be the third largest player in India soon.
25:01 What is your mental timeline?
25:03 So first and foremost, I want to repeat that we're not chasing market share.
25:11 We don't have any such internal goal of a timeframe to be X largest Y market share.
25:18 We just don't have that.
25:20 We're here for the long run.
25:22 And if you want to be around for the long run, you cannot chase short term market share.
25:27 You have to plan for five years, eight years, 10 years from now.
25:31 And that's what we are looking at.
25:33 Having said that in the month of July, we already were the number three player behind
25:39 Indigo and the Tata group.
25:41 That already happened in July.
25:43 So that's around the corner.
25:47 You don't have to wait six months for that to happen consistently.
25:51 But having said that, we're not chasing it at all.
25:54 All right.
25:55 Thank you so much, Mr. Dubey for answering all of our questions today.
25:58 Pleasure.
25:59 Thank you.
25:59 Thank you.
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