"All employees have agreed to resume duty right now. They are on duty as we speak," Kingfisher's chief executive Sanjay Aggarwal told reporters.

"We are all in this together and looking forward to getting the airline going in the next few weeks," he added.

The airline, controlled by liquor baron Vijay Mallya, will be unable to return to the air until it has convinced aviation regulators to reinstate its flying licence, which was suspended last week.

The striking staff -- which includes pilots, engineers and ground staff -- agreed to the airline management's new offer in which they would receive at least four months worth of pending salaries by Christmas.

Most staff, numbering at least 4,000, had not been paid for more than half a year, triggering the strike earlier this month.

"The management has shown magnanimity to resolve the issue," Vikrant Patkar, a Kingfisher pilot who led the employees' protest over unpaid salaries, told AFP.

Kingfisher owes billions of dollars in taxes, airport fees and salaries.

Mallya is desperately seeking a foreign buyer to save it from complete collapse, but many analysts are doubtful any rescue is possible.

Kingfisher was India's second-largest airline until a year ago but now it has a market share of just 3.5 percent, the smallest of the country's carriers.

Its shares rose 4.81 percent to 10.9 rupees on the Bombay Stock Exchange, reacting to the news.