Air India will pay its 31,000 employees two weeks late in the latest sign of the difficulties facing the country's aviation industry, especially the flag carrier.

The deferral of $70m of salaries for June, which will be paid on July 15 instead of July 1, comes as the government considers a large bail-out package for the airline, which lost an estimated $800m in the last financial year.

“Every airline in the world is presently facing a financial crisis, including the ones in India,” said Jitender Bhargava of Air India. “The position continues to be difficult.”

India's airline industry, which accounts for about 2 per cent of global airline traffic, is estimated to have lost a combined $1.4bn in the past financial year, a significant portion of the global airline industry's combined $10.4bn net losses in 2008.

But Air India, formed in 2007 with the merger of Indian Airlines, the domestic state carrier, and Air India, the international carrier, faces particular problems with reducing its bloated cost structure.

“The national carrier is facing perhaps is toughest- ever crisis,” Kapil Kaul of the Centre for Asia Pacific Aviation wrote in a recent report. “Aircraft utilisation remains poor, yields and load factors are both in decline, with no corresponding reduction in the cost structure.”

Air India's share of the domestic market has been eroded steadily since 2004 because of stiff competition from upmarket carriers such as Jet and Kingfisher, known for their premium service, and low-cost carriers such as Indigo and SpiceJet. Even as Indian passenger numbers have tumbled because of surging oil prices the global crisis, Air India took delivery of new aircraft that increased its capacity by 5 per cent over the past year.

The national flag carrier is due to take delivery of another 26 new aircraft from Boeing and Airbus during the new financial year as part of its $8bn order for new aircraft for the coming years, although management indicated recently that some deliveries could be deferred.