Air India was merged in 2007 with state-run Indian Airlines, which operated mostly domestic flights, but human resource issues never allowed the merger to take off, leading to a still-ongoing massive pilots' strike.
"It is important for a PSU (public sector utility) like Air India to formulate a Voluntary Retirement Scheme(VRS) for its employees so that excess man-power does not unduly increase the wage bill and depress productivity," the committee, headed by former apex court judge D.M. Dharmadhikari, said.
The committee also recommended compensating retiring employees significantly through an employees stock option plan, for which the airline needs to value its assets within and outside the country, and decide on a stake to float in a stock market.
"This can be an attractive option for about 7000 employees who are in the zone of retirement in the next five years," the committee's report, posted on civil aviation ministry's website, said.
Indian carriers are under tremendous turbulence, reeling under a combined debt load of $20 billion, and have failed to raise fresh funds, and a struggling rupee increased already-high fuel costs even further.
India's plans to allow foreign airlines to invest up to 49 percent in local carriers, which liquor baron Vijay Mallya-owned Kingfisher Airlines