"We are ready to hand over the Indian pilot if it leads to de-escalation," foreign ministry spokesman Mohammad Faisal told AFP, attributing the statement to Foreign Minister Shah Mehmood Qureshi.

He spoke a day after the pilot, Wing Commander Abhinandan Varthaman, was shot down in a rare aerial engagement between the South Asian neighbours over the disputed region of Kashmir.

The incident was the latest in a dangerous sequence of events between the two countries that have sent tensions rocketing, as major world powers including China, the US and the UN urged restraint.

It sparked fears of India and Pakistan -- who have fought two wars and countless deadly skirmishes over Kashmir -- entering a cycle of retaliation and counterattacks that could spiral out of control.

Varthaman, who rapidly attained hero status in his own country, has become the face of the escalating conflict, with analysts touting him as a potential trump card for Islamabad and perhaps the key to bringing the arch-rivals back from the brink.