Air India was hedging two million barrels of aviation turbine fuel annually at $75 per barrel, which should cover more than a fifth of its fuel requirements, the person said. The company did not expect oil prices to fall any further, the person said.

Crude oil prices slumped almost 50 per cent last year as the US pumped oil at the fastest rate in more than three decades while Opec resisted calls to cut supply. That resulted in boosting economies of import-driven countries, while providing a breather to airlines, which typically operate on tight margins.

Cheaper oil prices could help Air India save $324 million for the year ending March 31, 2016, and help it break even before its target of turning a profit by 2019.

Some airlines which had hedged jet fuel prices at higher prices have failed to take advantage of the recent slump, and may actually end up losing money from the sudden drop.

Some Asian carriers, like Singapore Airlines , have hedged fuel at an average of $116 a barrel, when spot market rates are about $85. That can result in losses on paper as airlines will have to account for their hedges or pay charges to unwind contracts prematurely.

Air India plans to cut 10 per cent of its variable cost of Rs 14,000 crore as it seeks to become a more efficient company, the person said. It won't replace 7,000 people due to retire in the next five-six years, he said.

Air India has about 23,500 employees with 108 planes. It plans to reduce its aircraft-to-personnel ratio to 1:100, the person said. It will do so by transferring as many as 12,000 employees to subsidiary companies handling ground operations and maintenance.

Air India Chairman Rohit Nandan did not respond to a call on his mobile phone.