Cash-strapped national carrier Air India on Thursday decided to cut performance-linked incentives of its employees by 30 to 50 per cent.
The decision was taken at a meeting between the management and employees union leaders and the workers have accepted the cut, an airline official said.
The incentives, being given to employees in addition to the salary, contributes to Rs. 130 crore of the airline's expenses.
The carrier had earlier come under severe criticism for offering huge incentives to its 31,000 employees, even while it was making losses.
Air India is also holding talks with various bankers to raise capital. The airline is now looking to convert its high cost debts to low-cost debts for which it needs the help of the government as a guarantor.
The government last month asked the carrier to cut costs and restructure the organisation for getting its financial support. Air India is likely to seek Rs. 3,000 crore equity infusion from the government.
The airline has also announced that it will launch low-cost services next month to cut operational costs.
The revival of the ailing national carrier was mentioned in the Independence Day speech by Prime Minister Manmohan Singh. He had said that the government was carefully looking into the problems of the carrier.
Air India is estimated to have suffered a loss of Rs. 7,200 crore in 2008-09. It is currently overburdened by its working capital borrowings of Rs. 17,000 crore and has overdrafts from 15 banks.