Air India to take $600 million hit from Pakistan airspace ban over 12 months, seeks govt compensation: Report

Air India expects to face around $600 million in additional costs if a ban from Pakistan's airspace lasts for a year, and has asked the central government to compensate it for the hit. According to news agency Reuters, Air India on April 27 asked the government for a "subsidy model" proportionate to the economic hit, estimating a loss of more than $591 million for each year the ban lasts.

Air India mentioned the above in letter sent by the airline to the Civil Aviation Ministry. "Subsidy for affected international flights is a good, verifiable and fair option…the subsidy can be removed when the situation improves," said the letter. Airlines are bracing for higher fuel costs and longer journey times after Pakistan shut its airspace to the country's carriers in a tit-for-tat retaliation following a deadly terrorist attack on tourists in Kashmir's Pahalgam last week.

Air India to face additional costs over Pakistan ban; here's why

“The impact on Air India is maximum due to airspace closure, due to additional fuel burn...additional crew.” Air India's letter was sent after the government asked its executives to assess the impact of the airspace ban on Indian carriers.

The government is considering options to reduce the hit to the airline industry from the closure of Pakistan's airspace. According to Reuters, carriers met with the Civil Aviation Ministry to work on possible solutions, including flying over difficult terrain closer to China, and some tax exemptions.

In its letter, Air India asked the government to liaise with Chinese authorities for certain overflight clearances, without elaborating. According to Reuters, it also asked the government to approve the carrying of extra pilots on flights on the United States and Canada to account for longer travel times.

Air India financials

The Tata Group-owned airline major is in the middle of a multi-billion dollar turnaround after a period of government ownership, and the growth is constrained by jet delivery delays from Boeing and Airbus. Air India reported a net loss of $520 million in fiscal 2023-2024, on sales of $4.6 billion.

Air India, which has a 26.5 per cent market share in India, flies to Europe, the United States and Canada, often crossing Pakistan's airspace. It operates many more long-haul routes than bigger domestic rival IndiGo. Data from Cirium Ascend shows IndiGo, Air India and its budget unit Air India Express had 1,200 flights combined from Delhi scheduled for Europe, the Middle East and North America in April.

With inputs from Reuters