Jet Airways has reversed its decision to make 1,900 staff redundant.
The about turn came after reports of political pressure on the Indian carrier’s chairman Naresh Goyal.
Early last week, the airline said it was releasing 800 cabin crew as well as cutting 15% off its winter schedule.
The airline next said it was also letting 1,100 temporary and trainee workers go.
But Mr Goyal announced over the weekend that the staff would be re-instated after he had a change of heart.
He denied any political pressure but reports in the Indian press said that the Indian civil aviation minister was claiming credit for Mr Goyal’s U-turn.
Mr Goyal was quoted in the local press as saying that he had "not talked to anybody. It does not matter what anybody says."
He maintained that "my management took this decision on the basis of certain economic conditions. As the head of the family, my conscience does not allow me to look at just the economics."
Jet also postponed the announcement of its quarterly results until this coming Saturday.
One analyst said a loss of around $100m was expected.
The turnaround comes after Jet also announced last week an alliance with fellow Indian carrier Kingfisher Airlines.
Mr Goyal said the alliance would make “huge savings” for the two carriers.
A statement from Jet cited record fuel prices, the global financial crisis and a drop in traffic as reasons for its move.
The Indian domestic market had “declined by double digit figures in recent month,” Jet said.
The cut in the winter schedule was “inevitable” because of this fall.
Jet and Kingfisher described their alliance as a “wide ranging” link up that will help them rationalise operations and save costs.
But a statement from the two carriers ruled out any “mutual investment” between them.
It said the Jet/Kingfisher tie up was in the Indian national interest and would strengthen the country’s aviation industry.
The scope of the deal includes codesharing on domestic and international routes, interlining, joint fuel management, joint ground handling operations, cross selling of flight inventories, joint network rationalisation and synergies, joint use of crews and reciprocity of frequent flyer programmes.
Mr Goyal said: “The...alliance represents a completely new industrial model for aviation in India that would be based on an unprecedented depth of cooperation between the two companies.
“There will be huge cost savings and revenue enhancement opportunities arising from this
alliance.”
Dr Vijay Mallya, Kingfisher’s chairman, said: “This is a quantum leap forward in the evolution of Indian aviation which will benefit customers by delivering the most comprehensive integration in the industry.”