The airline, however, will go-ahead with the $100 million FCNR (foreign currency non-resident) loan for which responses from various banks are awaited.

"Air India is not keen on raising money via the private placement of bonds as the recent cost-cutting measures have led to a marginal improvement in the financial position. But the $100 million fund raising plan is being worked out," said a top AI official.

The AI board has okayed the private placement plan three months back to meet the short-term fund requirements and the airline management has roped in ICICI's merchant banking arm I-SEC as advisor to the issue.

The $100 million FCNR loan, taken up after dropping the securitisation deal, will be placed by the bank which offers the lowestcoupon rate. It is believed that the Bank of India has offered a coupon rate of 7.5 per cent and the airline has asked for the responses from other banks.

A-I is trying to stem losses by redploying its fleet on profitable routes and through the sale of three 747-200 aircraft. A proposal to join a global alliance with its fellow code-sharing partner Trans Atlantic Pact is also being actively considered. AI officials are set to begin talks with the Air France management as a prelude to joining the alliance.

The fresh plans comes ahead of a major divestment programme before which the government will infuse Rs 1,000 crore as equity into the cash-strapped airline. Formal approval of the equity infusion by the Union cabinet will bail the airline out from the current crisis. The divestment will bring down the government's stake in the airline to 40 per cent. The airline has also taken the initial initatives for the sale of its subsidiary Hotel Corporation of India. IFCI has recently been appointed as advisor tothe deal.

The AI board last week dropped the ambitious $3 billion medium capacity loong range arircrtaft purchase plan opting instead for the Short capcity long range aircraft.