UPDATE 1-Air India pilots call off strike after court order

Wed Jul 4, 2012 3:43am EDT

* Delhi High Court orders pilots to resume work

* Dispute over exclusive rights to fly Dreamliners

* Air India international routes disrupted

* Fired pilots to be rehired on case-by-case basis

* Rival Jet Airways benefits from labour dispute

By Anurag Kotoky

NEW DELHI, July 4 (Reuters) - A group of pilots at ailing national carrier Air India demanding exclusive rights to fly new Boeing Dreamliners called off a 58-day strike late on Tuesday, bowing to pressure from the government and a Delhi court order.

About 500 Air India pilots who fly international routes have been demanding that colleagues from the former Indian Airlines not be trained to fly Dreamliners because they worried it could hurt their career prospects.

The Air India strike added to the chaos in an industry where the one-time No.2 carrier by domestic market share, Kingfisher Airlines, has slashed its operating fleet to 18 from 64 and has not paid staff since January.

The strike also forced Air India to cut back on its international schedule and combine flights, which further strengthened the hold on international routes by market leader Jet Airways.

"We, the pilots of Air India and members of the Indian Pilots Guild, on the intervention of Honourable Justice Ms. Reva Khetrapal of the Honourable Delhi High Court have started the procedure to resume work," the Indian Pilots Guild said in a statement late on Tuesday.

Some of the pilots are expected to return to work as soon as Wednesday and Air India will look at reinstating the striking pilots "sympathetically," said an Air India official, who did not wish to be named.

The airline has also sacked more than 100 striking pilots and said previously said it would consider rehiring those pilots on a case-by-case basis once they unconditionally report to work.

Tauseef Mukadam, the joint secretary of the Indian Pilots Guild, the union of the striking pilots, did not respond to calls for comment. K. Swaminathan, an Air India spokesman, declined to comment.

Indian aviation minister Ajit Singh earlier said the strike was illegal and the government will not enter into discussions with pilots until they report to work.

The Delhi High Court, which also previously called the strike illegal, on Tuesday ordered the pilots to return to work immediately and asked Air India's management to look into their demands.

STEEP LOSSES

Indian carriers are reeling under a combined debt load of $20 billion and annual losses of $2 billion, with a weak rupee adding to their already-hefty fuel costs. All but one of India's six big airlines loses money with privately held IndiGo the sole money maker.

Air India, still flying thanks to a much-criticised $5.8 billion government bailout, accounts for most of those losses, according to Centre For Asia Pacific Aviation.

The debt-laden carrier risked losing its bailout funds if the strike continued because the package is linked to meeting certain performance-based milestones.

Critics of ongoing government support for Air India argue the support enables it to charge below-cost fares, forcing competitors to do the same and subsidises a bloated workforce that at 218 staff per plane is nearly double that of Jet Airways' 116.

Air India and its domestic counterpart, Indian Airlines, were combined in 2007 in a merger beset with integration problems, most related to human resource issues. The combined carrier under the Air India brand has never made a profit.

Air India is expected to receive the first of its 27 Dreamliners soon, although the government has been wrangling with Boeing over compensation for delayed deliveries.

The purchase of Dreamliners was criticised by a federal auditor last year for "imposing an undue long-term financial burden."

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