Air India Faces $600 Million Loss from Pakistan Airspace Ban, Seeks Government Relief

Air India Faces $600 Million Loss from Pakistan Airspace Ban, Seeks Government Relief

May 10, 2025 | Aviation & Economy | By TE NOW

Air India, the country’s flagship carrier, is anticipating a financial setback of up to $600 million over the next 12 months due to Pakistan’s recent decision to block Indian aircraft from using its airspace. The move comes amid rising tensions between the two nations following the deadly attack on tourists in Jammu and Kashmir.

According to a letter viewed by Reuters, Air India has formally approached the central government seeking financial assistance to offset the potential losses.

Long-Haul Routes Most Affected

Air India, which holds a 26.5% market share in India’s aviation sector, operates a substantial number of long-haul international routes—including flights to Europe, North America, and Canada. These routes traditionally cross Pakistani airspace, allowing for shorter flight paths and lower fuel consumption.

With the closure of Pakistani airspace, flights are now forced to reroute over the Arabian Sea or Central Asia, resulting in:

• Longer flight durations

• Higher jet fuel consumption

• Increased operational costs

• Potential impact on schedules and connectivity

Industry-Wide Impact

The airspace restriction is affecting all Indian carriers, but Air India is hit hardest due to its global footprint. Competitor IndiGo, despite being India’s largest airline by domestic traffic, has limited exposure to transcontinental routes and thus faces a comparatively smaller disruption.

Air India estimates the additional cost burden primarily from:

• Increased fuel expenses

• Crew overtime

• Higher maintenance and ground handling costs

Industry analysts warn that prolonged restrictions could result in higher ticket prices, particularly on international sectors, to cushion losses.

Government Engagement & Strategic Concerns

The airline’s appeal to the government includes a request for partial compensation or fuel subsidy to navigate the financial shock. The request also reflects broader concerns about national aviation resilience and strategic preparedness in light of geopolitical tensions.

Pakistan’s decision to shut its airspace to Indian airlines is seen as a retaliatory measure after New Delhi launched a military operation earlier this week, following the April 22 attack on tourists.

Outlook

While diplomatic efforts are ongoing to de-escalate the situation, aviation experts suggest that prolonged airspace restrictions could significantly affect India’s position in global air traffic networks.

If no resolution is reached, Air India and other carriers may have to restructure flight schedules, renegotiate bilateral agreements, and invest in fuel-efficient aircraft to mitigate long-term exposure to geopolitical risk.