Hit by a surge in operational expenses due to the West Asia conflict, Air India has initiated a series of cost-containment steps, pausing annual salary hikes and asking employees to reduce discretionary spending. In a townhall meeting on Friday, CEO and MD Campbell Wilson cautioned the workforce that the year ahead could be "very, very difficult" unless external conditions improve. During the interaction with staff, Wilson, Chief Financial Officer Sanjay Sharma and Chief Human Resources Officer Ravindra Kumar GP stressed the urgent need to curb non-essential expenditure. Sharma explained that FY26 has already seen revenue soften due to global uncertainty, despite strong momentum in the previous financial year.
Wilson urged employees to adopt a strict approach towards expenses and said there must be a "laser-sharp focus on eliminating wastage and leakages". He also noted that the pressures stem from higher jet fuel prices, geopolitical disruptions, the ongoing Pakistan airspace closure and a sharp decline in the rupee’s value.
Increments deferred but no layoffs planned
CHRO Ravindra Kumar informed employees that variable pay for the previous year would be issued and promotions would go ahead. However, annual increments have been deferred by at least one quarter. Reassuring the workforce, he added, "We don’t anticipate layoffs."
The airline’s board discussed potential cost-saving methods a day earlier, including possible furloughs. With a workforce of roughly 24,000, this remains a sensitive area, though no final decision has been made.
External shocks hit airline hard
Wilson pointed out that the West Asia conflict and airspace restrictions have forced the airline to adopt longer routes for west-bound flights, significantly increasing operating costs. He said that if geopolitical tensions ease, the Strait of Hormuz reopens and oil prices drop, there is a strong possibility of recovery in consumer sentiment and business travel.
The CEO, who is set to step down later this year, acknowledged that the airline is dealing with one of the most challenging external scenarios in recent times. He said the industry as a whole is struggling with higher fuel costs and declining confidence among travellers.
Financial losses mount
According to internal estimates, the Air India Group, which includes Air India Express, is expected to have posted losses exceeding Rs 22,000 crore for FY26. The airline has been working on various operational improvements such as completing the retrofit of legacy narrow-body aircraft and adjusting its network to deploy capacity more efficiently.
The Tata Group took charge of Air India in January 2022, and since then the airline has recorded around 40 per cent CAGR in revenue between 2022 and 2025. However, the recent conflict-driven volatility has slowed its financial recovery.
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