Air India eyes cost reduction measures as West Asia conflict hits operations

Air India is evaluating a series of cost reduction measures, including temporary capacity cuts and workforce-related actions, as the escalating conflict in West Asia intensifies operational and financial pressure on the airline.

According to people familiar with discussions cited by Bloomberg, the airline’s board reviewed multiple proposals during a meeting on Thursday, including reducing flight capacity by more than 20% over the next three months if current geopolitical conditions persist.

The discussions come at a difficult moment for the Tata Group-owned carrier, which is already grappling with heavy losses, elevated fuel costs and leadership uncertainty.

Capacity cuts under consideration

Sources familiar with the matter said the airline is considering scaling back flights as higher aviation turbine fuel costs and disrupted airspace routes weigh heavily on long-haul profitability.

The proposed reductions would primarily affect international operations, particularly routes requiring longer flying times because of restricted airspace and operational rerouting.

Measures discussed by the board reportedly include:

• Reduction of flight capacity by over 20% for up to three months
• Temporary furloughs for nontechnical employees
• Lower employee bonus payouts
• Salary cuts for vice presidents and senior executives

The people cited in the report said the measures are likely to be announced soon if operating conditions do not improve.

Air India did not immediately respond to requests for comment, according to Bloomberg.

Geopolitical tensions add to airline pressure

The Iran conflict has disrupted aviation markets globally, pushing up jet fuel prices and forcing airlines to reassess schedules and operational costs.

For Air India, the latest disruption compounds an already difficult operating environment following previous airspace restrictions linked to tensions between India and Pakistan last year.

The airline has also been adjusting international schedules in recent months as fuel expenses and rerouting costs increase.

Earlier industry data from aviation analytics firm Official Airline Guide showed Air India had already reduced international frequencies across several North American and European routes during the summer schedule period.

Financial losses remain significant

The airline closed the financial year ending March 31 with a record loss exceeding ₹220 billion, equivalent to around $2.3 billion, according to the Bloomberg report.

The financial strain has also affected Singapore Airlines, which owns a 25.1% stake in Air India and has reportedly increased its operational involvement at the carrier as losses deepen.

Key financial and operational pressures include:

• Rising aviation turbine fuel prices
• Longer international flight paths due to airspace restrictions
• High operational and restructuring costs
• Continued fleet and service integration expenses
• Weak profitability on ultra long-haul routes

The aviation sector globally has faced renewed uncertainty following conflict-related disruption across key Middle East air corridors, a region critical to international airline operations and fuel supply chains.

Leadership transition adds uncertainty

The airline is simultaneously navigating a leadership transition after chief executive Campbell Wilson resigned in April.

Air India is now searching for a new CEO at a time when the airline is attempting to balance aggressive expansion plans with mounting operational pressures.

The leadership change comes amid wider shifts across India’s aviation sector. IndiGo, the country’s largest airline, appointed aviation industry veteran Willie Walsh as chief executive at the end of March.

Analysts say the next few months could prove critical for Indian airlines as geopolitical volatility, fuel prices and international airspace restrictions continue to affect profitability across long-haul networks.

Industry faces prolonged turbulence

The broader aviation industry has entered a period of heightened uncertainty as airlines worldwide respond to volatile fuel markets and changing operational conditions.

For Air India, the challenge now extends beyond short-term schedule adjustments. The airline must manage rising costs while continuing its long-term transformation strategy under Tata Group ownership.

The proposed cost-saving measures indicate that airlines operating large international networks may increasingly prioritise financial stability and operational flexibility until geopolitical conditions stabilise.