Air India Ltd. is poised to post its largest-ever annual loss, estimated at $1.6 billion, following last year's deadly crash and subsequent airspace shutdowns. The disaster and operational disruptions have erased the airline's hard-won progress toward financial stability, according to people familiar with the matter.

The crash and prolonged airspace closures dealt a severe blow to the carrier's turnaround efforts, which had been gaining momentum. These events not only crippled revenue but also triggered massive compensation claims and increased insurance premiums, creating a formidable financial hole for the Tata Group-owned airline.

Investors will scrutinize the upcoming earnings report for details on restructuring plans and cost-cutting measures. The loss underscores the immense challenges facing India's aviation sector, where carriers grapple with high fuel costs, intense competition, and infrastructure constraints. Air India's path to recovery remains fraught with uncertainty.