Air India faces $600M loss over Pakistan airspace closure
What's the story
Air India has estimated an additional cost of about $600 million, owing to a possible year-long closure of Pakistan's airspace.
The airline has sought compensation from the Indian government for the financial loss, as per a company letter seen by Reuters.
The closure is likely to incur annual losses of over $591 million, mainly due to increased fuel consumption, extended flight durations, and the necessity for additional crew on rerouted long-haul flights.
Operational challenges
Impact of Pakistan airspace ban on Indian airlines
Pakistan's airspace closure for Indian carriers comes after India suspended the Indus Waters Treaty, in the wake of the April 22 terrorist attack on tourists in Kashmir's Pahalgam.
Indian airlines have since readied themselves for higher fuel costs and longer journey times.
Air India has sought a "subsidy model" from the government, in line with the economic impact, estimating losses over ₹50 billion ($591 million) annually for each year the ban continues.
Subsidy proposal
Air India's request for government support
In a letter to the Civil Aviation Ministry, Air India proposed that "subsidy for affected international flights is a good, verifiable and fair option ... the subsidy can be removed when the situation improves."
The airline emphasized that "The impact on Air India is maximum due to airspace closure, due to additional fuel burn...additional crew."
Financial status
Financial struggles and market position
The Tata Group-owned airline is undergoing a multi-billion-dollar transformation after years of government ownership.
Its growth has been constrained by delays in jet deliveries from Boeing and Airbus.
In fiscal 2023-2024, Air India posted a net loss of $520 million on sales of $4.6 billion.
Despite these challenges, it still commands a 26.5% market share in India and flies several long-haul routes to Europe, the US, and Canada, often crossing Pakistan's airspace.
Collaborative efforts
Government's response to Air India's request
Reportedly, the Indian government is considering measures to reduce the impact of Pakistan's airspace closure on the airline industry.
Indian carriers have approached the Civil Aviation Ministry to discuss possible solutions, like flying over difficult terrain closer to China, and some tax exemptions.
In its letter, Air India asked government to coordinate with Chinese authorities for certain overflight clearances and also sought permission for carrying extra pilots on flights bound for the US and Canada to account for longer travel.