Air India is considering furloughs, executive pay cuts, lower bonuses, and major flight reductions as mounting financial losses and geopolitical tensions place additional pressure on the carrier’s operations.
According to a Bloomberg report citing people familiar with the discussions, the airline’s board reviewed several cost-cutting measures during a meeting on May 7, 2026. The proposals could be implemented if market conditions and operational challenges continue to worsen over the coming months.
The airline is reportedly evaluating temporary furloughs for non-technical staff, reductions in management compensation, and cuts to employee incentive payments. Air India is also considering reducing flight operations by more than 20% between May and July 2026 as it attempts to stabilize finances amid soaring operational costs and weaker travel demand.
The carrier recorded a loss exceeding INR220 billion (USD2.3 billion) for the financial year ending March 31, 2026, marking one of the largest losses in its history. The financial strain has intensified following ongoing conflict involving Iran, which has disrupted major international flight corridors and increased operating expenses for airlines across Asia and Europe.
Indian airlines, including Air India, continue to face extended flight times on routes to Europe and North America because of restrictions in Iranian airspace. The situation has been compounded by the closure of Pakistani airspace to Indian carriers, a restriction that has now remained in place for approximately one year following heightened tensions between India and Pakistan in 2025.
The longer flight routings have significantly increased fuel consumption and operational costs at a time when global jet fuel prices remain elevated. Industry analysts say the combination of rising fuel expenses, geopolitical instability, and softer passenger demand may force Indian airlines to reduce capacity by as much as 30% during the 2026 summer travel season.
Separately, Air India has intensified internal compliance and ethics enforcement efforts. According to remarks made by chief executive and managing director Campbell Wilson during an internal town hall meeting, the airline has terminated more than 1,000 employees since 2023 for ethical and disciplinary violations.
The reported infractions included misuse of employee travel privileges, smuggling goods from aircraft, and allowing passengers to carry excess baggage without paying required fees. Company officials emphasized that the disciplinary actions are unrelated to the cost-cutting discussions currently being considered by the board.
Air India continues to pursue a large-scale transformation program aimed at modernizing its fleet, expanding international operations, and improving service standards despite growing financial and geopolitical challenges.
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Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com
