Mumbai: Air India’s pilots returned to work on Wednesday after the government intervened to suspend incentive cuts, but the conciliatory move may push chairman Arvind Jadhav, struggling to save money at the loss-making national carrier, into a corner.

National Aviation Co. of India Ltd, or Nacil, which runs Air India, lost more than Rs100 crore of revenue in the five days since Saturday when at least 200 executive pilots went on strike, protesting against the proposed cut of as much as 50% in productivity linked incentives, or PLIs.

Back to normal: Passengers arrive to catch Air India flights at the IGI Airport in New Delhi after pilots called off their strike on Wednesday. The carrier had to cancel around 400 flights since Saturday due to the strike. Manvender Vashist / PTI

The government’s rescue plan for the airline depends on the success of a cost-cutting programme, a key element of which has been stopped in its tracks.

With accumulated losses of Rs7,200 crore and borrowings of up to Rs15,241 crore at the end of June, up from Rs6,550 crore in November 2007, Nacil had asked the government for a loan and equity infusion of around Rs15,000 crore.

Union civil aviation minister Praful Patel had said on Wednesday that the government was planning to give at least Rs5,000 crore to Air India in phases to help the carrier manage the crisis. Air India’s current equity capital is Rs145 crore.

The equity infusion will be given in three tranches over three years, with Rs2,000 crore in the first, another Rs2,000 crore in the second and Rs1,000 crore in the final one. The government rescue is contingent on cost-savings being made.

A committee will be formed to examine the PLI cut proposal, the government said on Wednesday.

All pilots who had reported sick informed the airline that they will resume work as soon as possible.

V.K. Bhalla, a Delhi-based representative of Air India’s executive pilots, said the strike had been called off following an intervention by Prime Minister Manmohan Singh and aviation minister Patel. The pilots were assured by the management that there would be no reduction of salaries, he said.

This has severely curtailed Jadhav’s space to manoeuvre.

“Even if the employees concede for a 10% to 15% reduction during the deliberations of the newly set up committee, that will not give any significant savings to Air India," said Balakrishnan, the former Indian Airlines official. “If he wants to turn around the carrier, either he will have to reduce the employee strength by 30-35% or (make an) equivalent reduction in wages."

Air India had cancelled 111 flights in advance on Wednesday due to the non-availability of pilots, to avoid inconvenience to passengers. Air India, which had at one point decided to suspend operations for a fortnight, had to cancel at least 400 flights during the stir.

“The domestic and international operations would be normalized by today evening except for two long-haul international flights," said Jitender Bhargava, executive director, corporate communications, Air India.

He said the effective date of resumption of non-stop flights to New York from Delhi and Mumbai will be taken once executive pilots who have reported sick in the past few days start reporting fit for duty.

“As regards domestic operations, Air India has drawn up a flight restoration plan for ensuring normal operations on trunk routes with immediate effect and major and other routes being restored at the earliest, keeping in view that tomorrow will mark the beginning of a long weekend," an Air India media statement said.

It’s not clear how Air India will justify its case before the committee of secretaries constituted by the government to decide on equity infusion and soft loans. Patel said it would also help to restructure the carrier’s debt.

Air India’s Bhargava said the airline has constituted a sub-committee to look into fresh cost control measures and savings.

“They will look at various options for cost cutting. Though there is no time-frame, everything will be" speeded up, Bhargava said.

A reduction in PLIs was one of the main cost cutting measures suggested by the board to revive the airline since it would help save Rs750 crore a year. In the face of widespread protests from unionized employees, on 23 September, the Air India board decided to cut PLIs for officers and top managers, covering 7,000 of 31,500 employees.

“A good opportunity to set the house in order has been wasted. Till the next crisis, it will be business as usual now," said an aviation expert who did not want to be named.

Earlier this month, hundreds of pilots of private sector carrier Jet Airways (India) Ltd went on mass sick leave for six days to protest the firing of two pilots instrumental in forming a pilots’ union.

The strike resulted in a revenue loss of $8 million a day for the airline.