Air India, India?s ailing national flag carrier, has decided to reduce costs by retiring 3,000 of its regular staffers through a voluntary retirement scheme (VRS), details of which are being worked out.

The national carrier has also decided to redeploy 19,000 employees to its maintenance, repair and overhaul (MRO) and ground-handling subsidiaries by January. In the long term, the airline expects to lower headcount by another 5,000 through natural attrition.

After the VRS details are worked out, Air India will approach the government for funds to finance the scheme. The airline is expected to first present the VRS plan to a group of ministers (GoM) for an in-principle approval.

Air India has a total manpower of 42,000, of which 29,000 are regular employees while the remaining are either casual or contractual workers.

When contacted, Air India CMD Rohit Nandan told FE that the company was working on creative solutions to reduce operating losses, without confirming or denying the VRS plan.

Air India?s current aircraft-to-manpower ratio is 1:230, which means around 230 people service one aircraft. After all the components of manpower rationalisation, this is expected to come down to 1:105-125, comparable with private sector counterparts like Kingfisher and Jet Airways.

The airline?s wage bill, which takes up 17% of revenues, is also expected to come down to 10-12% in line with carriers in the private sector.

Manpower reduction, which will bring down costs, will also brighten Air India?s chances of getting the remaining funds from its bailout package. Though the government had approved a bailout package of R5,000 crore for the airline earlier this year, it has so far disbursed only R3,200 crore. Further disbursal is subject to its cutting costs and preparing a turnaround plan.

The GoM recently decided to refer Air India?s financial restructuring to the Reserve Bank of India (RBI) since it involves reworking bank loans.

Air India has set up a committee to suggest ways to rationalise routes. It plans to club flights,

reduce frequency and form code-share alliances to reduce operating losses.

?We are losing significantly on flights to Europe and the United States. Still, we can?t pull out from there. Those are signature routes with which Air India is identified,? said an official.

The loss-making and debt-laden carrier is expected to post a record operating loss above R7,000 crore this current fiscal on the back of increased fuel costs and aircraft purchase payments.

Currently, Air India has aircraft loans of R20,185 crore and working capital loans of R22,165 crore on its books. In addition, it owes R2,600 crore to jet fuel marketing companies, R800 crore to airports and R400 crore to vendors. Its losses have swollen to R20,000 crore while its equity is all of R2,145 crore.

The turnaround plan vetted by the GoM ? which has been sent to the RBI for approval ? entails converting R22,000 crore of working capital loans into a mix of R7,000-8,000 crore equity and the rest into long-term, low-interest debt. After RBI approval, the matter will go to the Cabinet.