Air India looks to rejig contracts, insource services

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Calls for staff suggestions on ways and means to save costs

By Rohit Vaid

Updated - October 16, 2026 at 07:53 PM. | New Delhi, Oct 15

New Delhi, Oct 15

Tata Group-promoted Air India is looking to cut costs through contract rejigs and insourcing of services as part of efforts to strengthen the airline’s financial position.

Accordingly, the airline has invited employees to suggest cost-saving and revenue-enhancing measures under its programme ‘PRABHAV’, said CEO and MD Tewolde Gebremariam in a memo to employees, which was reviewed by businessline.

Besides the employee-led cost-saving drive, the airline’s board has considered a broader set of measures to enhance efficiency, drive up synergies between Air India and Air India Express and strengthen the Group’s financial position at a meeting on Thursday (October 15).

Meanwhile, under the programme ‘PRABHAV’, the airline has identified areas such as contract optimisation and renegotiation, insourcing of outsourced activities, improved utilisation of resources, efficient procurement of goods and services, and waste reduction.

Notably, employees have been encouraged to suggest ways to maximise revenue through new opportunities and derive greater value from existing products, services and capabilities.

To drive the exercise, Air India has established a full-time, multidisciplinary, cross-functional Cost Savings Team to systematically review expenditure and identify savings across functions.

“Cost savings cannot be driven by a single team or function alone; it requires the active participation and commitment of every employee,” he said.

As per Gebremariam, cost consciousness has to become a part of the airline’s culture, alongside operational excellence, with a focus on frugality, accountability and thoughtful decision-making.

“We should continually challenge ourselves to ask – is this expenditure necessary? Is there a more efficient way to achieve the same outcome?” he said.

Furthermore, sources had earlier told businessline that Air India’s board was expected to review its staff travel policy and cost-saving proposals.

In the memo, Gebremariam said that the airline has revised its SoD approval matrix, with all approvals routed through the head of department, CXO and CEO, effective October 1.

According to Gebremariam, the revision is intended to ensure greater rigour, transparency and alignment in decision-making.

Previously, Air India had revised staff travel arrangements from April 1, 2025, requiring employees, including senior management, to travel in economy. Upgrades to premium economy or business class were permitted only if seats remained unsold 50 minutes before departure, prioritising availability for paying passengers.

The latest measures come amid a broader push for cost savings and closer integration across the Air India Group.

Last week, sources told businessline that the airline’s board would examine a proposal to integrate selected departments of Air India and Air India Express through common teams to reduce duplication, improve resource utilisation and achieve economies of scale.

The discussions cover human resources and finance, amongst other functions. The proposed arrangement would retain the airlines’ distinct identities, with Air India continuing its full-service positioning and Air India Express retaining its low-cost model.

In his latest message, Gebremariam flagged pressure from ongoing airspace closures, the conflict in the Middle East and its resulting operational disruptions, and persistently high jet fuel costs.

The cost-saving push comes against the backdrop of substantial losses. In FY26, Air India and Air India Express, along with their joint ventures and subsidiaries, reported combined losses of ₹22,238 crore on revenue of about ₹71,870 crore.

Published on October 15, 2026

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