Air India is facing one of the most difficult periods in its post-privatisation turnaround, with the airline’s board convening this week to discuss sweeping cost-cutting measures, operational restructuring, and leadership succession amid mounting financial losses and geopolitical disruptions. We wrote about some of the earlier considerations being made for cutting costs,
Air India Board considers ways to keep costs down
According to multiple reports from sources familiar with the discussions, the Tata Group-owned airline is estimated to have posted losses exceeding INR 22,000 crore (USD 2.6 billion) for the financial year ended March 2026. The worsening financial situation was a central topic at a May 7 board meeting chaired by Natarajan Chandrasekaran, chairman of both Tata Sons and Air India.
The crisis has been intensified by the ongoing instability in West Asia, which has sharply increased fuel costs and forced Indian carriers to reroute long-haul flights due to airspace restrictions. Air India, with its extensive international network, has been hit harder than its competition.
The airline has already reduced international operations in April and May, and CMD Campbell Wilson informed employees in an internal town hall that additional schedule reductions would continue through June and July. According to reports from The Economic Times and Times of India, Air India plans to trim nearly 100 flights daily across domestic and international routes.
Long-haul routes to Europe, North America and Australia are among the worst affected. The closure of Pakistani airspace has forced Air India to operate longer routes on westbound flights, increasing fuel burn and crew costs. Some North America-bound services now require technical stops, further eroding profitability.
In an internal communication, Wilson acknowledged that many international services had become “unprofitable to operate” because of the “massive rise in jet fuel prices” combined with airspace closures and longer flight paths.
The carrier is now exploring a wide range of austerity measures. Air India has discussed furloughs for some non-operational staff, reductions in discretionary spending, and tighter controls on procurement and employee-related costs. The airline has reportedly clarified internally that no layoffs are planned at this stage, though executives have been instructed to reduce non-essential expenditure.
One proposal under consideration is to unbundled premium services that were historically included in fares. Air India is evaluating whether lounge access and even meals could become optional add-ons on certain tickets, including some business-class fares. The airline is also considering differentiated fare structures for passengers willing to forgo onboard meals.
The discussions underscore the difficult balancing act Air India faces as it attempts to modernise its operations while preserving cash. Since Tata Group reacquired the airline from the Indian government in 2022, Air India has embarked on an ambitious transformation strategy involving fleet renewal, brand investments, product upgrades, technology modernisation, and the integration of Vistara into the broader Air India Group.
But the airline’s transformation program has also coincided with industry-wide pressures. Fuel accounts for up to 40% of operating expenses, according to industry estimates cited in Indian media reports. Global jet fuel prices have surged dramatically since February, with airlines warning that additional increases could make several routes financially unsustainable.
The situation has become serious enough that Indian carriers, including Air India, approached the government in late April seeking relief measures and intervention on aviation turbine fuel pricing. Industry executives warned policymakers that continued cost escalation could force further service reductions across the sector.
The good news is that while Air India has deferred increments for now, the airline will proceed with planned promotions, and variable pay will be paid at about 76%, as that is how much Air India received toward achieving its financial targets for the year. The losses were caused by the Pakistan airspace closure, which has been in place for over a year, the AI 171 crash, the long queue and dismal numbers in H1B visa issuance, and, of course, the Middle East Geopolitical issues.
At the same time, Air India’s leadership transition is adding another layer of uncertainty. Wilson, a former Singapore Airlines executive who was brought in to spearhead the airline’s transformation, stepped down and is holding fort at the moment. The board meeting also reportedly included discussions around succession planning, with both internal and external candidates under consideration.
Singapore Airlines, which owns a 25.1% stake in Air India following the Vistara merger, remains closely involved in the airline’s strategic direction. Singapore Airlines CEO Goh Choon Phong is a member of the Air India board.
For the Tata Group, the financial strain highlights the enormous complexity of reviving an airline that spent decades under state ownership. Air India has made visible progress in customer experience, fleet modernisation, and international market positioning over the past two years. Yet the airline now finds itself squeezed by macroeconomic shocks largely outside its control.
The board’s deliberations suggest that Air India’s next phase may focus less on expansion and more on financial discipline, capacity rationalisation, and the preservation of liquidity until geopolitical and fuel market conditions stabilise.
Bottomline
Air India has bled a lot over the past year, and the airline has racked up a massive loss amid issues it largely seems to have no control over. In the face of all of it, the airline is going to do something around employee pay to keep costs steady, and might furlough people for the time being as well. In addition, we will operate reduced schedules for another two months (through July).
What do you make of the situation at Air India?
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