The projected deficit represents one of the most challenging periods in the history of Indian aviation. After narrowing its losses by nearly a quarter in FY25, the airline was hit by a “perfect storm” of tragedy and geopolitical friction in 2025.
1. The June 2025 Ahmedabad Tragedy
The primary driver of the financial reversal was the June 12, 2025, crash of Air India flight AI171 in Ahmedabad.
- The Incident: A Boeing 787-8 Dreamliner bound for London Gatwick crashed into a medical hostel complex shortly after takeoff, killing 260 people.
- The Aftermath: Beyond the immense human cost, the crash led to grounded aircraft, massive compensation liabilities, and a sharp decline in passenger confidence, particularly on high-yield international routes.
- AAIB Findings: Preliminary reports indicated a fuel supply cutoff to both engines within a one-second gap, causing critical cockpit confusion.
2. Geopolitical Airspace Closures
Operational costs skyrocketed due to the closure of Pakistan’s airspace for Indian carriers following a military clash in April 2025.
- Operation Sindoor: The ongoing airspace restrictions have forced Air India to reroute its North American and European flights.
- The Cost of Detours: These longer routes have increased fuel consumption and flight times, adding an estimated ₹4,000 crore ($480 million) in annual operational expenses.
Air India Financial Snapshot (2024–2026)
| Metric | FY25 (Actuals) | FY26 (Projected) |
| Standalone Net Loss | ~₹3,976 Crore | ~₹15,000 Crore |
| Operational Goal | Fix the Basics (Taxiing) | Break-even (Missed) |
| Major Disruption | Restructuring Costs | Ahmedabad Crash & Airspace Bans |
| Shareholder Impact | 25.1% stake for SIA | Severe pressure on SIA earnings |
The Management Crisis
The financial strain has reportedly led to a leadership vacuum at the top.
- Search for a New CEO: The Tata Group is reportedly searching for a successor to Campbell Wilson, whose five-year plan was recently rejected by the board for being insufficiently aggressive in light of the new losses.
- Singapore Airlines Pressure: Singapore Airlines (SIA), which holds a 25.1% stake in the merged Air India-Vistara entity, reported an 82% decline in quarterly earnings in late 2025, largely attributed to Air India’s weak performance.
Conclusion: A Resilience Test for Tata
The $1.6 billion loss is a sobering reality check for the privatization of Air India. While the airline continues to modernize its fleet—deploying new A350s and upgraded 787-9s on European routes—the combined weight of the 2025 crash and high fuel costs have created a “re-entry” problem. For the Tata Group, the focus for the remainder of 2026 must shift from “growth at any cost” to stabilizing a brand that is currently in survival mode.
