National carrier Air India is understood be in negotiations with state-run banks to avail working capital loans at low interests, Air India sources said.

"We are talking to some banks to avail working capital loans in the range of Rs 1,500-2,000 crore," airline sources said in Mumbai today.

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The cash-strapped carrier already has over Rs 16,000 crore working capital borrowings on its balance sheet, coupled with around Rs 7,200 crore expected losses for this year.

As part of its cost-cutting measures, the airline has been in talks with the banks to convert its high-cost debt into low-cost ones.

Meanwhile, Air India has released productivity-linked incentives (PLI) and flying allowances of its 31,000-staff including pilots for July.

The airline management in June had requested its senior officials over the rank of General Managers to forego their July salary, PLI and flying allowances in view of the financial crisis facing the company.

Besides it also proposed up to 50 per cent cut in PLI, flying allowances for its senior management, including executive pilots and engineers.

This move was aimed at saving around Rs 750 crore annually out of its total wage bill of over Rs 3,100 crore as part of the cost-cutting measures.

However, after the unions opposed the move and the executive pilots resorting to a five-day agitation, the management succumbed to their demands and kept the proposal in abeyance till a sub-committee of its board took a final call on the issue.

The pilots ended their stir, which lead to over Rs 100 crore loss to the airline, after Civil Aviation Minister Praful Patel assured them that their PLI dues would be paid by October 7.

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