West Asia flight suspensions: Air India faces 40% hit, IndiGo 20%, SpiceJet also impacted, says HSBC report

Escalating geopolitical tensions in the Middle East have begun to weigh on India’s aviation sector, with widespread flight cancellations and rising fuel risks creating near-term operational and financial pressure, according to HSBC Global Investment Research.

In a note dated March 2, HSBC said Indian carriers have been forced to suspend all flights to the Middle East and certain parts of Europe due to airspace closures and heightened regional instability. While some routes may eventually resume via longer alternate corridors, the brokerage cautioned that such diversions would increase flying time and operating costs.

Significant capacity hit

HSBC estimates that the cancellations could meaningfully dent airline capacity. IndiGo is likely to see around 19–20% of its overall capacity impacted, equivalent to 60–65% of its international operations. For SpiceJet, the hit could be steeper at about 30–32% of total capacity, while Air India may see more than 40% of its capacity affected. Akasa Air could see 13–14% of total capacity disrupted.

The report assumes that all flights to the Middle East, most services to Europe and some US-bound routes are cancelled.

In financial terms, HSBC estimates that IndiGo could face a daily revenue loss of ₹45–50 crore and a daily net profit loss of ₹4–5 crore. For SpiceJet, the projected daily revenue loss is ₹5–5.5 crore, with a net profit impact of ₹0.25–0.35 crore per day.

Short-term redeployment

HSBC noted it does not expect airlines to immediately redeploy grounded aircraft to alternate routes. “In the short term, we don’t think capacity can be deployed at such short notice,” the report noted. However, if disruptions persist, airlines could gradually adjust schedules and shift aircraft to other domestic or international sectors.

The brokerage added that SpiceJet may be relatively more vulnerable given its higher exposure to wet-leased aircraft, where lease payments continue irrespective of usage.

Oil price sensitivity

Beyond direct losses from cancellations, a spike in crude oil prices presents an additional headwind. Brent crude has already risen amid the conflict, and further escalation could push prices higher, increasing jet fuel costs.

HSBC estimates that, all else being equal, every $1 per barrel increase in jet fuel prices could raise IndiGo’s annual fuel bill by about ₹300 crore and SpiceJet’s by ₹27.5 crore. A USD 5 per barrel increase could push IndiGo’s annual fuel costs higher by around ₹1,510 crore, potentially impacting its FY27 profit before tax (PBT) by 19%.

Under a seven-day disruption scenario, IndiGo’s PBT could decline by approximately ₹32 crore, equivalent to about 6% of its Q4 FY26 estimate. Additionally, a USD 5 per barrel rise in jet fuel prices over seven days could have an impact of roughly ₹12 crore.

Long-term outlook

Despite the near-term turbulence, HSBC believes the structural investment thesis for IndiGo remains intact. The brokerage acknowledged that investor sentiment may weaken in the short run due to operational disruptions and oil volatility, but it does not see a material long-term risk to the airline’s growth trajectory.

HSBC maintains a “Buy” rating on IndiGo, while retaining a “Reduce” stance on SpiceJet, citing relatively higher operational and balance sheet sensitivity.

With over 20% of global oil flows moving through the Strait of Hormuz and continued uncertainty in the region, the Indian aviation sector faces a challenging few weeks. The duration of the conflict and the trajectory of crude prices will be critical determinants of the sector’s earnings outlook.