Air India turns to pay cuts and fewer flights as war worsens financial struggles

Air India Ltd. is looking to implement measures to cut costs and reduce flights in the wake of the Iran war, people familiar with the matter said, just as the unprofitable airline searches for a new leader to navigate an exceptionally difficult period.

Among the measures discussed in a board meeting on Thursday were furloughing nontechnical employees and cutting flight capacity by over 20% for the next three months unless the situation improves, said people with knowledge of the matter who did not want to be identified as the discussions are private.

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The board also discussed paying out lower bonuses for all employees and pay cuts for those at the level of vice president and above, the people said. The cost-cutting measures at India’s second-largest airline are likely to be announced soon, they added.

An Air India representative did not immediately respond to a request for comment.

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The moves signal 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.

The carrier closed the financial year on March 31 with a record loss of more than 220 billion rupees ($2.3 billion). Singapore Airlines Ltd., which owns 25.1% of Air India, has seen its earnings dragged down by the losses and as a result is deepening its operational involvement at the carrier.

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.

India’s largest carrier IndiGo 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.