Air India has assured its more than 24,000 employees that layoffs are off the table, even as the Tata-backed carrier defers annual salary increments by at least one quarter and tightens spending. The airline has been buffeted by the closure of Pakistan airspace, disruptions due to the West Asia war, and surging jet fuel costs.

“We don’t anticipate layoffs,” said chief human resources officer (CHRO) Ravindra Kumar G.P., addressing the employees during a town hall on Friday, two people present there told Mint.

The country’s second-largest airline is battling a string of issues, including rising losses, geopolitical headwinds, macroeconomic factors such as the rupee’s depreciation against the dollar, which are impacting costs, and a leadership transition.

The CHRO added that the airline will defer annual increments by at least one quarter in light of the uncertain economic environment and will proceed with variable pay for the last financial year. It will continue with planned promotions too.

Chief executive Campbell Wilson, also present at the town hall, reiterated the need to bring down costs. “We need to focus relentlessly on our costs in these tough times,” Wilson told employees. He urged employees to suspend discretionary spending, renegotiate rates where feasible, and defer non-critical expenditures.

The Tata Group-backed airline’s losses have reportedly exceeded the ₹10,000 crore reported in FY25. The privately held Air India is yet to announce its FY26 numbers.

The employee town hall was held a day after the Air India board met to discuss the finances for the fiscal year ended 2026. Nearly a month back, on 8 April, Tata Sons chairman Natarajan Chandrasekaran told Air India employees to focus on execution amid industry-wide challenges.

Air India did not respond to Mint’s queries on the discussions in the townhall.

Cutting expenditure

Chandrasekaran’s town hall came amidst reports of rising losses and a leadership transition at the airline. Outgoing chief executive Wilson had resigned on 30 March and is currently serving his notice period. There is still no word on his successor.

The reassurance to employees regarding job security is significant. Chairman Chandrasekaran had said: “We need to concentrate on what is within our control, sharpen our cost discipline, and stay realistic about the situation”. This had raised concerns about the possible cost-cutting measures that the airline would have taken.

Speaking on the airline’s financial performance, chief financial officer Sanjay Sharma said that FY26 has seen a softening in revenue amid heightened external uncertainties. In contrast, FY25 saw strong revenue growth and fleet expansion, which drove financial momentum.

“Air India’s top brass appears to be signalling that FY27 will be a year of tighter financial control in an environment marked by volatile fuel prices, higher operational costs from rerouted international flights, and weaker discretionary spending by consumers. Like other airlines globally, Air India is rebalancing growth ambitions with profitability targets,” said Gagan Dixit, senior VP – Oil & Gas and Aviation at brokerage Elara Capital.

Other than network rationalization, it is trying to cut down discretionary expenditure and improve operational efficiency. That suggests management views the present turbulence as cyclical rather than structural, he added.

“The deferment of increments also indicates that airline executives expect external pressures to persist for at least some more time,” Dixit said.

The absence of layoffs and the continuation of variable pay are important signals internally. They indicate that the airline still expects medium-term demand growth and wants to maintain employee morale during a period of operational transition and market uncertainty, he added.

Ending air routes

Route cuts will continue as the airline plans to rationalize operations amid the current rise in operational costs.

Air India has already reduced some international operations for April and May, with cuts extending into July, after soaring jet fuel prices, longer flying routes due to airspace closures, and operational disruptions rendered several international flights unprofitable, Wilson had said in an earlier internal memo.

“To partially compensate for the huge spike in costs, we have increased airfares and imposed fuel surcharges, but, understandably, these higher airfares impact customer demand, so we can only raise fares so far before people decide to stay home,” he had then said.

The aviation sector has also seen a slowdown in domestic air traffic growth since covid. Domestic air traffic growth slowed down to 1.3% to 167.46 million in FY26, sharply down from the over 7% growth of FY25, as per data from the aviation safety regulator, the directorate general of civil aviation.

Jet fuel, a key component of airline operating costs that normally accounts for 35-40%, has remained highly volatile, adding pressure to international operations already impacted by geopolitical disruptions and longer flight times.

While the civil aviation ministry capped domestic jet fuel price hikes at 25% in April and kept prices unchanged in May, the relief does not apply to international flights, where fuel prices doubled in April and rose another 5% in May.

Air India, which is owned by Tata Sons with a 73.82% stake and Singapore Airlines Ltd (SIA) with 25.1%, has also been seeking additional funding from its shareholders, although the amount committed could not be independently ascertained by Mint.