Neural Network (NN) models based on autoregressive structures have long been used for nonlinear system identification problems, Their application for on-line implementations, however require them to be trained within a prescribed time span, which is often related to the sampling time of the system. In this paper, we introduce a NN model that is embedded with a dimensionality reduction mechanism in order to reduce the size of the network. The dimensionality reduction is based on Principal Component Analysis (PCA) and the resulting smaller NN trains faster. The longitudinal and lateral dynamics of a rotary wing Unmanned Aerial Vehicle (UAV) is modelled using flight test data. The results of system identification, error statistics and training times are provided to highlight the benefits of the proposed approach for NN based system identification models.