Air India Seeks Compensation for $600 Million Loss Due to Pakistan Airspace Ban
Air India has warned it could incur up to $600 million in additional costs if Pakistan’s airspace ban persists for a year. The airline has requested the Indian government to compensate for these financial losses, according to a letter reviewed by Reuters.
Indian airlines are facing increased fuel expenses and longer travel times after Pakistan closed its airspace to Indian carriers in retaliation for an attack on tourists in occupied Kashmir last week.
On April 27, Air India asked the Indian government for a “subsidy model” to help mitigate the economic damage, estimating losses of over 50 billion Indian rupees ($591 million) annually for the duration of the airspace closure, according to a letter sent to India’s Civil Aviation Ministry.
The letter suggested that a subsidy for affected international flights would be an effective, transparent, and equitable solution, with the option to remove it once the situation improved.
“The impact on Air India is significant due to the airspace closure, resulting in additional fuel consumption and the need for extra crew,” the letter stated.
Air India declined to comment, and India’s Civil Aviation Ministry did not immediately respond to a request for a statement.
The letter was sent after the government asked airline executives to assess the consequences of the airspace ban on Indian carriers, according to a source familiar with the matter.
The airline, owned by Tata Group, is currently undergoing a multi-billion-dollar restructuring after a period of government ownership. However, its growth is hindered by delays in jet deliveries from Boeing and Airbus. Air India reported a net loss of $520 million for the fiscal year 2023-2024 on revenues of $4.6 billion.
With a 26.5% market share in India, Air India operates long-haul flights to Europe, the United States, and Canada, frequently crossing Pakistan’s airspace. It offers significantly more international routes than its larger domestic competitor, IndiGo.
Data from Cirium Ascend shows that in April, Air India, its budget subsidiary Air India Express, and IndiGo together had about 1,200 flights scheduled from New Delhi to Europe, the Middle East, and North America.
The Indian government is considering various options to reduce the impact on the airline industry due to the closure of Pakistan’s airspace, according to three sources familiar with the matter.
One source mentioned that Indian carriers had met with the Civil Aviation Ministry to explore alternatives, including flying over more challenging terrain near China, as well as possible tax exemptions.
In its letter, Air India also requested the Indian government to engage with Chinese authorities for overflight clearances and to approve the carrying of additional pilots on flights to the United States and Canada due to the extended flight times.
