Deloitte has recommended loss-making Air India (AI) to put a freeze on pay hike or promotion of its employees for the next three years to make a turnaround, said a report on Friday.

Currently, AI has an employee count of 31,000 people and annual wage amounted to Rs 31 billion ($686 million). However, around 2,600 employees are expected to retire in the next three years.

The financial advisory firm also suggested the state-owned airline to cut expenditure on aviation turbine fuel (ATF) by Rs 3,000 million ($66.3 million) annually, by aggressively negotiating with suppliers for domestic routes, said Business Standard report on Friday.

Earlier, the carrier said that taking ATF suppliers from the private sector is one of the ways to reduce fuel costs, as they offered better volume discounts. Currently, AI’s fuel requirements are being met from the state-owned oil companies in India and its annual bill amounts to Rs 400 billion ($8.8 billion).

“The airline will be negotiating with private oil companies like Reliance and Essar on a discount and will be able to save Rs 300 crore per year through this,” said a report citing a source.

In the last three years, the carrier had accumulated losses of Rs 150 billion ($3.3 billion) and its pays Rs 18 billion ($400 million) as annual interest on its debt of Rs 400 billion ($8.8 billion).

AI has asked the Indian government for an additional equity infusion of Rs 20 billion ($442 million) in the current 2010-2011 financial year. Recently, the government infused Rs 12 billion ($265 million) into the loss-making airline, apart from Rs 8 billion ($177 million) in 2009-2010. The government’s equity base totaled Rs 2.1 billion ($464 million).

The carrier is expected to discuss Deloitte’s proposals during the next board meeting on January 19. Deloitte was hired by AI to evaluate its financial plans.

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