Air India (AI, Delhi International) is considering furloughs for non-technical employees, lower bonuses, executive pay cuts, and flight reductions of more than 20% from May through July 2026 as the Iran war worsens its financial position, Bloomberg reported, citing people familiar with the matter.

The measures were discussed during a board meeting on May 7, 2026, and could be implemented if operating conditions do not improve.

The carrier posted a record loss of more than INR220 billion rupees (USD2.3 billion) for the financial year ended March 31, 2026. Bloomberg reported that the war had compounded Air India's existing pressures after a fatal crash and airspace closures linked to India's border flare-up with Pakistan in 2025.

Indian carriers are flying longer routes to Europe and the US because of restrictions in Iranian airspace, on top of the closure of Pakistani airspace to Indian airlines, which has been in place since May 2025.

These factors, combined with higher fuel costs and weaker demand, may lead the airlinest to cut capacity by up to 30% during the 2026 summer season.

Ethics-related terminations

Separately, Air India has terminated more than 1,000 employees since 2023 for ethical breaches, including misuse of staff travel benefits, smuggling goods off aircraft, and allowing passengers to carry excess baggage without collecting applicable fees, Hindustan Times outlet reported, citing chief executive officer and managing director Campbell Wilson's remarks during an internal town hall.

The disciplinary actions are separate from the cost-cutting measures discussed by the board in May 2026.

ch-aviation has contacted Air India for comment.