New Delhi / Mumbai: The National Aviation Co. of India Ltd, or Nacil-run Air India, the national carrier, will draw up a revival plan that includes cost-cutting measures as part of conditions for a government rescue plan.

The airline will have to give a time-bound programme that will involve financial and manpower restructuring, civil aviation minister Praful Patel said on Wednesday. The government’s rescue measures will have to be matched by extraordinary measures on the part of Air India.

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The carrier has delayed June salaries to 31,000 employees by two weeks as it runs short of cash amid falling travel demand. The airline, which aims to cut employee costs by Rs500 crore a year, has asked top executives to forgo salaries in July to help overcome the cash crunch.

Air India will have to submit the restructuring plan in a month to a panel of government officials, Patel said. Once the government approves the plan, the panel will periodically review the progress Air India makes on the plan.

Patel said the carrier’s plane purchase programme won’t be hampered as it needs to replace ageing planes to compete. The carrier’s revival may take as much as two years, he said. Air India’s top management may need to be recast, Patel said, without giving any details, after meeting Prime Minister Manmohan Singh earlier on Thursday. The recast may take a month, he said.

Separately, Patel called on the government to decide on confidence-building measures for the aviation industry, including a look at sales tax on aviation turbine fuel.

Prime Minister Singh assured full government support for Air India, Patel said. The government wants to ensure that the crisis facing the carrier is tided over and that it becomes financially stable, he said. This is the first time Air India is seeking government support, Patel said. The government’s bailout, the quantum of which hasn’t been decided yet, may take the form of equity and loans, he said.

Air India may have had losses of at least $800 million (Rs3,880 crore) in the fiscal ended March, according to the Centre for Asia Pacific Aviation.

Airline losses globally may total $9 billion this year, nearly double a previous forecast, according to the International Air Transport Association.

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