Winning Bizness Desk
Mumbai.Tata Group-owned airline company Air India is preparing for one of its toughest financial phases in recent years as rising fuel prices, Middle East tensions and mounting operational costs push the carrier towards aggressive cost-cutting measures. The airline may reduce salaries of senior officials, trim employee bonuses and cut nearly 20% of its flight operations over the next three months to control losses. At present, Air India operates around 900 flights daily across domestic and international routes.
Rising fuel burden shakes airline finances
The crisis has largely been triggered by the ongoing Iran-Israel conflict, which has sharply increased global crude oil prices and disrupted international flight paths. Due to restrictions and security concerns in the Middle East region, Air India flights heading towards Europe and North America are now taking longer alternative routes.
This has increased flying time by nearly 1.5 to 2 hours on several sectors, leading to massive additional fuel consumption.
Key concerns before Air India:
- Jet fuel prices continue to rise rapidly
- International routes have become longer and costlier
- Operational expenses are climbing every month
- Airline is already facing heavy financial losses
According to reports, discussions during a recent board meeting included sending non-technical staff on leave and reducing salaries of officials at Vice President level and above. Sources also said employee bonuses across departments could face cuts as the airline attempts to stabilise its balance sheet.
Investment push adds pressure on balance sheet
Air India is simultaneously undergoing a massive transformation exercise under the Tata Group. The company has placed large aircraft orders and started upgrading cabins of older planes to improve passenger experience and rebuild its global image.
However, this heavy investment is currently adding pressure on finances.
Three major reasons behind the growing losses:
- Expensive alternate flying routes due to war
- Massive investment in new aircraft and cabin upgrades
- High maintenance cost of ageing Boeing aircraft fleet
Apart from this, the airline is also spending heavily on legal and integration procedures linked to its merger plans with Singapore Airlines.
Flight cuts likely for next 90 days
Sources said the airline board has proposed reducing flight operations by more than 20% over the next three months. The temporary reduction may continue until geopolitical conditions in the Middle East improve.
The sharp rise in crude oil prices has further worsened the situation. Since February 28, crude prices have reportedly jumped nearly 45.5% due to the conflict involving Iran and the United States. While the Indian government capped the increase in domestic Aviation Turbine Fuel prices at 25%, international operations continue to face significantly higher fuel costs.
Fuel now biggest challenge for airlines
Industry body FIA said the huge gap between domestic and international fuel prices has destabilised airline finances. Earlier, fuel accounted for nearly 40% of operational expenses. That figure has now climbed close to 60%, severely impacting profitability across the aviation sector.
The troubles have also exposed a leadership vacuum inside Air India. The airline is still searching for a permanent CEO after the resignation of Campbell Wilson in April. Alongside rising fuel costs and expensive aircraft maintenance, last year’s tensions involving Pakistan had already added pressure on operations. Industry experts believe the coming few months could prove critical for the airline as it balances expansion plans with financial survival.
