Air India plans performance-linked stock option scheme for employees

Air India plans to introduce a performance-linked stock option scheme to boost productivity and retain talent. The Tata Group aims to align employee performance with growth as part of efforts to turn around the loss-making airline

New Delhi: Air India is planning to introduce a new performance-linked stock options reward system for its employees in order to boost productivity as the Tata Group looks at ways to turn around the loss-making airline.

Eligible employees, including pilots, engineers, and senior management, will be able to buy shares after being granted stock options at prices between the Rs 4 face value and the market value at the time of grant, according to a report in Livemint on Monday.

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The plan, approved at an extraordinary general meeting on February 13, aims to motivate employees and align their performance with the company’s growth agenda. It is designed to reward and attract talent across Air India and its subsidiaries.

“The objective of PSOP (performance stock option plan) 2026 is to reward the eligible employees of Air India and its subsidiaries, present or future, for their performance and to motivate them to contribute to the growth and profitability of the company,” said the resolution at the meeting. “The plan aims to attract, retain and reward talent in the organisation,” the report states.

The airline will issue about 227.1 million stock options, equal to 0.25 per cent of its total share capital, as new shares for eligible employees, according to a disclosure to the corporate affairs ministry on April 6, the report added. Singapore Airlines has also been given pre-emptive rights to maintain its 25.10 per cent stake by purchasing additional shares if needed.

The vesting period ranges from one to five years. This means that Tata is seeking continued services from its employees as part of this new reward system. The nomination and remuneration committee will decide eligibility, share allocation, and pricing, the report added.

India’s two other listed airlines, IndiGo and SpiceJet, have already introduced ESOP schemes. Privately-held Akasa Air also has such a scheme in place. Air India previously allotted shares to nearly 8,000 employees during its acquisition from the government in January 2022. The move was part of an Employee Share Benefit Scheme managed by SBICAP Trustee Co Ltd.

Under the new performance-linked plan, employees may receive only half the shares if the airline achieves less than 85 per cent of its internal targets, according to the report. The structure is designed to reward performance and encourage higher efficiency.

The development comes while Air India is undergoing a leadership transition as CEO Campbell Wilson resigned on March 30. He will stay until a successor is appointed. His term was originally set to end in July 2027.