(Reuters) – Air India is drawing up a proposal to offer voluntary buyouts to just over a third of its 40,000 employees, a senior company official said, one of the largest such offers in India's state sector, as the carrier slashes costs ahead of a 2018 sale.
The official, who could not be named as the plans are not public, said the state-owned airline had also put fleet expansion on hold, scrapping a proposal to lease eight Boeing 787 wide-body aircraft. Air India's board approved the proposal in April but nothing further had been done.
India's flag carrier is on the block after Prime Minister Narendra Modi's cabinet last month approved plans to privatise the loss-making airline – selling part or all of the company and ending decades of state support.
Founded in the 1930s and known to generations of Indians for its Maharajah mascot, Air India has a complex fleet, too many staff relative to its peers and $8.5 billion in debt. Since 2012, New Delhi has injected $3.6 billion to keep it afloat.
An official in Modi's office said the leader, under pressure to cut spending and boost basic infrastructure like ports and roads, is in "no mood" to provide fresh monetary assistance to any loss-making public sector company.
The official said that top bureaucrats in the civil aviation ministry and at Air India had been asked to present a report on how a Voluntary Retirement Scheme (VRS) could be offered to about 15,000 of Air India's 40,000 staffers, including contractors.
"Nothing has been finalised but our aim is to make the strategic sale as simple as we can," said a second top official in New Delhi, involved in the airline's daily operations, adding that any fresh investments would be put on hold.
Previous attempts to offload the airline have failed mainly because of the scale and complexity of problems at Air India, as well as its influential unions.
If Modi can pull the privatisation off, it will buttress his credentials as a reformer brave enough to wade into some of the country's most intractable problems.

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In its heyday, Air India boasted of a talent pool that newly founded airlines dipped into.
The government will, however, need to convince seven trade unions to accept the plan to make the company attractive to potential buyers, including buyouts and other efforts to slash costs. Their initial response was not positive.
"The government will propose a VRS scheme and we will throw their proposal in the dustbin," said J.B. Kadian, leader of a union that represents 8,000 non-technical staff of Air India.