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Pakistan, Middle East bans, airspace disruptions push Indian airline sector into crisis

By The South Asia Times

SINGAPORE - Indian airlines are being pushed to the brink as airspace closures by Pakistan and several Middle Eastern nations force carriers onto costly, roundabout routes, compounding a severe financial crisis that has seen Air India’s losses double to more than US$2 billion.

According to a CNA report, Pakistan has banned Indian carriers from its airspace since April 2025, while restrictions across Iran, Saudi Arabia, and other Gulf states have squeezed key corridors linking India to Europe and North America. The prolonged detours have dramatically increased fuel burn and operating costs.

The Federation of Indian Airlines (FIA), which includes Air India, IndiGo, and SpiceJet, warned the government on April 26 that jet fuel now accounts for 55–60% of operating expenses, far above the global average of 20–30%. Analysts say Indian carriers have little room to absorb shocks due to heavy fuel taxes, a weakening rupee, and limited fuel hedging programs.

Unlike global peers such as Singapore Airlines or Wizz Air, which hedged fuel costs well in advance, Indian airlines have absorbed most price spikes directly, citing regulatory hurdles and capital constraints.

While India has capped domestic jet fuel price increases at 25% per month, international-route fuel remains uncapped. State-run refiners are now considering a request to hold off further price hikes until the Middle East conflict ends.