The 54-year old Nandan, a 1982-batch IAS officer, has been appointed as the new CMD for a period of three years as per the notification. His predecessor Jadhav was shunted out nine months before his three-year term is due to end on May 4, 2012 and has been sent back to his parent Karnataka cadre.

Jadhav has been under attack not only from sections of the employees like the pilots but also political parties who have trained their guns on him. His tenure so far has experienced three major strikes by pilots and other employees.

The Government’s move came in the wake of the sharp criticism by the Opposition in the Lok Sabha (lower House of the Parliament) about the dwindling health of the cash strapped airline.

Nandan, who took over from Jadhav immediately after his appointment this evening, said he would respond to all major issues faced by the airline, attaching top priority to revive it through financial restructuring.

The Government has decided to help Air India to pay the salary of its employee which has been held up since two months. It has also decided for a further equity infusion to the tune of Rs 1200 crore in Air India.

The Government is also in the process of inducting 'three to four independent Directors' to the Air India Board in place of former FICCI secretary-general and the present West Bengal Finance Minister Amit Mitra and Vice Chairman and MD of the Mahindra Group Anand Mahindra, who had quit a few months ago.

Three functional Directors for Finance, Personnel and Commercial, would also be appointed to the Board soon, highly placed official sources said.

'This will be the classical governance structure' for Air India, they said, adding that the functional directors, who have so far been from within the organisation, could now be from outside.

As Air India is passing through critical financial crunch, the equity induction would not only ease the cash flow situation of the Company but would also preclude borrowings from the markets at high costs.

Air India's present paid up equity capital is not sufficient for an aviation company of its size. The company is currently struggling to address costly legacy assets, a weakening revenue stream and high cost structure resulting in rising liabilities.

The Group of Ministers in its meeting held on February 3, 2010 had suggested a credible plan for revival of the national airline.

It suggested rationalisation or harmonisation of the wage costs and legacy union agreements. This may lead to severe IT issues and Governments support to the management would be essential.

It also recommended setting up of support businesses of MRO, ground handling and cargo.

Thereafter, as desired by the GoM, both Ministry of Civil Aviation and the management of Air India have undertaken extensive evaluation of the situation at Air India from a long-term perspective, to arrive at certain definite options for Air India's future viability.

The Government of India and the Ministry of Civil Aviation (MoCA) have been monitoring Air India since June 2008 and since June, 2009 there have been extensive interactions between MoCA and Air India in working towards a solution for the future viability of Air India.

Several rounds of presentations have been made during this period by Air India management to the COS, the GoM and Cabinet has also been apprised on the developments at Air India.

Earlier based on the approval of Cabinet Committee on Economic Affairs, Government had so far approved Rs.2000 crore as equity investment in the Air India during the year 2009-10 and 2010-11. Besides, Government had also approved and released a sum of Rs.500 crore as equity investment in Air India during the current financial year.

Further, considering the precarious liquidity position of Air India, Prime Minister's Office constituted a Group of Ministers to oversee the affairs of Air India. The Group of Ministers had a series of meetings and desired that a viable and credible Turn Around Plan (TAP) be evolved by the airline. Air India has prepared a TAP and Financial Restructuring Plan (FRP) in consultation with the financial consultant M/s. SBI Caps which is under consideration of the Government. The turnaround plan envisages swift and coordinated action to expand market share in a rapidly growing industry thereby ensuring a return to profitability.