Airlines in India went through probably their worst year in 2025 post Covid, hit by an air crash which killed 260 people, and in November, unable to adhere to the regulator’s flight duty time limitation norms, the country’s largest airline was forced to cancel hundreds of its flights.

The West Asia crisis sparked by the Israel-US-Iran conflict has deepened the woes of an already beleaguered aviation sector, hitting the India-Gulf corridor, one of its busiest routes, which carries lakhs of business and leisure travellers and migrant workers. The crisis has triggered multiple flight cancellations, with airlines expected to incur losses of hundreds of crores, in addition to ICRA's forecast of an Rs 17,000-Rs 18,000 crore loss in FY26.

The aviation turbine fuel, which accounts for 40 per cent of a normal fare, is expected to rise further because of the oil shortage and the closure of the Strait of Hormuz. It is one of the most strategically important waterways in the world because it is the primary maritime gateway for Gulf oil and gas to global markets, with no full like-for-like alternative route ensuring that any prolonged disruption will keep fuel costs elevated.

According to the International Air Transport Association, long-haul and Gulf routes (where Air India, IndiGo, and a few others operate) tend to generate higher profits per passenger than typical domestic sectors. On average, airlines in India derive around 25-35 per cent of their revenues from international routes.

As domestic air fares are highly commoditised, airlines in India will be forced to pass on higher costs to international passengers rather than to domestic passengers, thereby increasing air fares and making them less competitive against major international players, which have deeper pockets and can absorb higher costs, at least for some time, to defend market share.

If the conflict in West Asia drags on for months, Indian airlines will have to redesign their network plans for West-bound operations and use northern routings via Central Asia or Russia, further adding to costs and stretching already weak balance sheets.

Crises like these also underscore how fragile the Indian aviation ecosystem is, which is entirely dependent on the ineptitude of state-run agencies. The ability to bounce back from such a scenario will take much longer than expected, and repeated shocks expose how little policy and regulatory reform have done to build resilience. The Open Skies policy, which allowed private enterprises to operate airlines, is over three decades old, and the needle hasn’t moved much towards a better, more efficient, and more robust industry.

Constant shocks like this will continue to undermine the industry, which is infamously known for being a graveyard for domestic airlines, with at least one commercial airline on average going down every 1-1.5 years over the past three decades, even excluding cargo and non scheduled players.

© Free Press Journal