Air India is reportedly preparing major cost-cutting measures as the ongoing Iran conflict continues to disrupt global aviation operations and increase operational expenses for airlines worldwide.
According to people familiar with internal discussions, the airline’s board recently considered several emergency measures, including reducing flight capacity by more than 20% over the next three months, unless market conditions improve. The proposals also include possible furloughs for non-technical employees, lower employee bonuses and salary cuts for senior executives at vice president level and above.
The developments come during an especially difficult phase for Air India, which is already dealing with financial losses, operational disruptions and leadership uncertainty. The airline is currently searching for a new chief executive officer after Campbell Wilson resigned in April.
The airline reportedly recorded losses exceeding ₹22,000 crore in the financial year ending March 2026. Minority shareholder Singapore Airlines, which owns a 25.1% stake in the carrier, has also seen its earnings impacted and is said to be increasing operational involvement within the airline.
The Iran conflict has sharply raised aviation fuel prices and disrupted global air routes. Indian airlines are facing higher costs because of restricted airspace over Iran and Pakistan, forcing flights to Europe and North America to take longer alternate routes. Aviation turbine fuel prices in May were reportedly 63% higher for international operations compared to pre-conflict levels.
Industry sources also indicated that Indian airlines could collectively reduce summer flight capacity by as much as 30% because of weak demand and rising operating costs. Higher ticket prices caused by fuel surcharges and rerouting costs have reportedly affected passenger demand during the summer travel season.
Travel industry experts say uncertainty around Middle East tensions and rising airfare prices are discouraging advance bookings, especially for long-haul international travel.
Meanwhile, India’s aviation sector is also dealing with broader pressures including a weakening rupee, rising operational expenses and cautious consumer spending. Analysts believe airlines may continue focusing on capacity rationalisation and cost management until geopolitical and fuel market conditions stabilise.