Air India's Financial Turbulence: $1.6 Billion Loss Looms in FY 2025-26
In a significant setback for India's aviation sector, Air India, the full-service airline operator owned by the Tata Group, is anticipated to report a net loss of at least $1.6 billion for the financial year ending 2025-26. This projection, reported by Bloomberg citing sources familiar with the matter, comes amid the company's ongoing turnaround efforts and follows the devastating Ahmedabad crash in June 2025.
Double Blow: Crash and Airspace Closure Impact Earnings
The airline's financial woes have been exacerbated by two critical events. First, the deadly crash of an Air India flight from Ahmedabad to London in June 2025, which resulted in over 240 fatalities, severely disrupted operations and damaged passenger confidence. Second, the closure of Pakistan's airspace for Indian carriers, due to geopolitical tensions, has forced airlines like Air India to take longer, more costly routes to destinations in Europe and the United States.
This airspace restriction has led to higher operating costs and reduced efficiency, further straining the airline's finances. Air India, along with its stakeholders Tata Group and Singapore Airlines, has not responded to queries regarding these developments, as reported by LiveMint.
Turnaround Plan Derailed Amid Market Challenges
Prior to the crash, Air India was on a path toward profitability, with founders targeting an operational break-even point in FY 2025-26. However, sources indicate that profitability is now out of reach, highlighting the severity of the current situation. The reports of potential losses emerge as the Indian aviation market grapples with multiple headwinds, including:
- Mass flight cancellations and delays
- Flyers' anxiety in a duopolistic market
- Overall industry recovery challenges
Management and Financial Struggles Deepen
Air India's management has submitted a new five-year plan that projected profits only in the third year, but the board of directors has rejected it, demanding a more aggressive turnaround strategy. Financial data from Tofler reveals that Air India incurred losses of nearly ₹32,210 crore over the past three years, despite seeking at least ₹10,000 crore in support from parent companies.
The rising losses are a concern for both Tata Group and Singapore Airlines, which holds a 25.1% stake after Air India's merger with Vistara in 2024. Singapore Airlines has seen its own earnings decline due to Air India's performance, even as it assists in restructuring efforts, such as bringing aircraft maintenance in-house.
Additionally, the search for a replacement for CEO Campbell Wilson may be delayed until the crash investigation report is released, adding to the uncertainty surrounding the airline's future. As Air India navigates these turbulent times, its ability to recover and achieve financial stability remains in question, with the broader aviation industry watching closely.
