The Tata Group-backed Air India Ltd. is discussing ways to implement measures to cut costs, including possible furloughs and deferment of performance-linked bonuses, as the airline grapples in the wake of rising operating pressures amid the ongoing West Asia conflict.
The airline company held a board meeting on Thursday and discussed furloughing non-technical employees, including cutting flight capacity by over 20% for the next three months unless the situation improves.
What happened during the board meeting?
The board discussed paying out lower bonuses for all employees and pay cuts for those at the level of vice president and above. The cost-cutting measures at India’s second-largest airline are likely to be announced soon.
Sources from Air India confirmed to Financial Express Online that the burden of loss is likely being pegged at Rs 22,000 crore over the past year. This was largely due to closure of Pakistani airspace for a year after Operation Sindoor, forcing Air India to reroute its Europe and North America-bound flights over significantly longer paths, adding hours to journey times and thousands of additional kilometres per departure. Middle-east airspace closure was the next big concern that led to losses skyrocketing.
With Aviation Turbine Fuel (ATF) prices running high, every rerouted flight has translated into a sharp spike in operating costs, multiplied across hundreds of weekly departures. The disruption to Dubai airspace has delivered a separate blow to the airline.
Campbell Wilson’s absence during board meeting
What has added a layer of intrigue to the developments is the absence of Air India’s CEO from the board meeting where these very issues were placed on the table. The meeting, which discussed the mounting financial strain including the airspace closures and fuel cost escalations, proceeded without the airline’s top executive.
Sources have not offered an explanation for the CEO’s absence, and Air India has declined to either confirm or deny the reported figures or the circumstances surrounding the board meeting.
This development signals the first major sign of distress at an Indian airline since the start of the Iran war, which has roiled the aviation industry worldwide. For Air India, the war compounds its existing struggles following a fatal crash and airspace closures due to the border flare-up with Pakistan last year.
Global airlines suffer as jet-fuel surge
On March 31, the carrier closed the financial year with a record loss exceeding Rs 22,000 crore ($2.3 billion). Singapore Airlines Ltd., which owns a little over 25% of Air India, has seen its earnings dragged down by the losses.
The turmoil also comes as the Tata Group-owned airline is looking for a new chief executive officer to replace Campbell Wilson, who resigned in April.
IndiGo, India’s largest carrier by market share, appointed aviation veteran Willie Walsh as its new CEO at the end of March to steer it through a particularly tough time for the country’s airlines.