The demand was made at a recent joint meeting this month where unions sought the restoration of 58 years as the retirement age. The revision to 60 years, applicable to all public-sector units (PSUs), was made to defer the over Rs 10,000-crore outgo on acount of provident fund and gratuity. This period would be used to implement the fifth pay commission report.

The employees, however, believe that this has had an adverse effect on the endeavour to cut costs. "On the one hand, the government wants to reduce the number of employees, while on the other, it has increased the service-age limit, which will slow down outgo of staff," an union representative said.

If the management reverts its decision, around 500 employees will be out of service immediately, with an equal number leaving service in the two years,he added. AI has over 20,000 employees.

According to the staff, the revised retirement age has taken its toll on the internal promotion system, and will also affect the voluntary retirement scheme (VRS) being planned. If benefits are linked to salary grades, many employees would hesitate to subscribe to the VRS before the grades are improved.

The management plans to put up the proposal for discussion in the board meeting. Both Air India and Indian Airlines (IA) now have separate boards, which were constituted recently. Secretary, civil aviation, PV Jayakrishna is now chairman of Air India, with Michel P Mascarenhas continuing as managing director.

The change was done to expedite the privatisation process of both the airlines. According to civil aviation minister Ananth Kumar, the disinvestment process will be introduced early next year.

Industry experts believe that the financial-saving estimates made by the government in the new retirement age will go haywire with the proposed VRS, which will involvea significant outgo. There will, however, be few takers if the package offered is financially not attractive, they add.

Meanwhile, plans to merge AI and IA, as suggested by the international consultant AF Ferguson & Company, also appears to be on hold. The report had recommended formation of a holding company, of which the two national carriers were to be wholly-owned subsidiaries.