Gulf airspace closure to impact Air India, IndiGo earnings

After Pakistan, the closure of Gulf airspace due to escalating conflict in West Asia will impact the domestic carriers’ earnings in the last quarter of FY26 as international operations remains a key earning source for Air India and IndiGo.     

Air India, IndiGo, Akasa and SpiceJet have announced cancellation of flights to Middle East and long-haul operations flying past the gulf region. DGCA said that 410 flights were cancelled on February 28. Around 440 flights are expected to be cancelled on March 1. IndiGo has issued free of cost cancellation and rescheduling of flights to and from Middle East till March 7.

Air India and IndiGo have both put out list of cancelled flights, keeping in mind the safety of passengers with escalating conflict in the West Asia. This means closure of the second western air corridor for domestic carriers after Pakistan airspace remains closed for the last 11 months.    

There are only two open corridors for flying on the west of India – Pakistan and Arabian Peninsula – Riyadh, Muscat and Jeddah. However, the airspace of 11 countries -- Iran, Israel, Lebanon, Saudi Arabia, Bahrain, Oman, Iraq, Jordan, Kuwait, the UAE and Qatar, has been listed as a “high-risk zone” by the DGCA advisory.

Revenue Loss

Gulf markets is a key contributor to India’s aviation sector, accounting for nearly 50% of total international passenger traffic to and from India.

Air India and IndiGo both have posted loss in the Q3FY26 and the last quarter of the current fiscal year is likely to remain red with cancellation of flights in key sector.

Due to ongoing Pakistan airspace closures, around 800 weekly flights departures and arrivals on long haul and mid- long haul by Indian airlines are impacted. It has added to operational challenges with increased flight durations, higher fuel consumption, increased refueling stoppage and increased crew requirement.

Air India chief Campbell Wilson has put the financial impact of Pakistani airspace closure to be around Rs 4,000 crore on an annualised basis.

Air India has said that its long-haul flights are taking longer routes adding to the cost while IndiGo has suspended operations to central Asia. This will add to the growing revenue loss of domestic carriers due to rupee depreciation and dollar dominated lease obligations.