'Most of the financial impact yet to be felt': Air India hit by Middle East conflict, CEO flags rising costs

The airline’s flights to the UK, Europe, and North America are also taking longer flight paths due to airspace restrictions, resulting in higher fuel consumption.

• Air India cancels 2,500 Middle East flights due to conflict
• Only 30 percent of normal Middle East schedule is operating
• Jet fuel prices have doubled, raising costs for Air India Group

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The Air India Group has been significantly affected by the ongoing Middle East conflict, with the full financial impact "yet to be fully felt", Air India CEO Campbell Wilson has said, stressing the need for tighter-than-ever control of unnecessary expenditure.

Loss-making Air India and Air India Express have faced major operational disruptions since the start of the conflict involving the US, Israel, and Iran on February 28.

"In the three weeks since the conflict started, we have had to cancel around 2,500 flights to the region. As of today, we can operate only around 30 per cent of our normal Middle East schedule because airports and/or airspace are closed, or are assessed to be beyond our safety threshold," Wilson said in a message to staff on Friday.

The airline’s flights to the UK, Europe, and North America are also taking longer flight paths due to airspace restrictions, resulting in higher fuel consumption.

Wilson noted that the scale of Air India Group’s usual operations to and through the Middle East makes the impact particularly significant. While the spot price of jet fuel has more than doubled, he said, most of the financial effect will only hit the group from next month.

“Given economic uncertainties, it is not certain that customers or companies will be as willing to travel as they were prior to the conflict, and may choose to stay put for a while,” he added.

Highlighting the company’s strategy amid rising costs, Wilson said, “For now, though, we should continue to focus on safe operations, keep tighter-than-ever control of non-urgent or unnecessary expenditure, support each other and keep delivering great Air India service to our customers.”

Air India, Air India Express, IndiGo, and Akasa Air have imposed fuel surcharges amid soaring jet fuel prices. However, Wilson cautioned that not every customer is willing to pay higher fares. “There is a limit to how high we can price before demand drops,” he said.

He added that while there are “pockets of new demand,” particularly in Europe and North America, airlines in some parts of the world are already reducing flights due to high fuel prices. “Depending on how fuel costs, airfares and customer demand moves, we may also have to adjust,” Wilson said.