VISTARA AIRWAYS CASE

Vistara Airways, 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 started operating over 370 daily flights to almost 68 destinations both in India as well as 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... 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 Vistara fuel price of US$140. The rise in fuel prices pushed the fuel bills of the aviation industry to US$186 billion by the end of the year 2008.

Vistara Airways appointed Indian American Vikram Dube, a senior executive with Delta Airlines, as its chief executive officer in May 2017. On his appointment, Dube said he is looking forward to meeting the organizations' business objectives and deepening the relationship with its strategic partner Etihad Airways. Dube's appointment also comes at a time when the airline is facing challenging business conditions and its consolidated net profit fell nearly 95 per cent to Rs 23 crore within three months ended March 2017 as higher fuel prices and lower fares took a toll on its bottom line.

On September 1, 2017, Vistara-Airways announced that it would retrench nearly 1,100 of its staff (Cabin Crew Members and Ground staffs). On September 2, 2017, Naresh Goyal, CEO of Vistara-Airways retrenchedits cabin crew members and Ground staffs without any prior notice but offered them a month's wages in lieu of notice and settled the accounts as required under the law before retrenching them and intimated the appropriate government on September 3, 2017.

In the last week of September 2017, Vistara further decided on a 20% cut in the salaries of its pilots, engineers, and some other staff. The company planned a 5 to 10 percent wage cut of top officials who drew a salary above Rs. 75,000 per month and in this respect, Vistara put up the notice on 1^st October 2017 and send the intimation to all its employees who would be prejudicially affected by using their official e-mail ID. The said notice is also sent to the employees' Union Office. There was no response either from Union or from individual employee of Vistara Airways. The reduced rate of wage therefore disbursed to the employees on 30^th October 2017.

Vistara further decided to pay its all pilots once in two months because Vistara was facing financial constraints during 2017. The expert believes that it is nothing but violation of labour laws. But counter argument is that labour laws are not applicable to the pilots as they are well paid, may be, more than a lakh per month.

The employees of Vistara Airways consulted with Ramesh, a consultant, whose comments are as follows:

1. The retrenched employees are entitled to 3 months prior notice or 3 months wages in lieu of 3 months' notice. So, action taken by Naresh Goyal is not tenable in the eye of Law.

2. The Vistara-Airways has to apply to the Appropriate Govt before retrenching its employees as per the mandate of the Industrial Disputes Act, 1947 and the said Govt has to allow Vistara Airways to retrench its employees. In this case Naresh Goyal has not applied to the Appropriate Govt hence action taken by Vistara Airways is illegal and subject to quash.

3. Mr Ramesh believes that the Vistara Airways cannot reduce the salary of its employees. It is unusual on the part of the employees to think that his/her salary or remuneration may be reduced in the future date.

4. Disbursement of salary once in two months is nothing but clear violation of Payment of Wages Act. So action taken by Vistara Airways is illegal.

Questions:

1.Whether actions taken by Vistara Airways are legal in all counts or partly legal and partly illegal?

2.Whether Ramesh's stands are correct in all counts or partly correct and partly incorrect?