Indian airlines face $68 million loss as war-risk insurance triples West Asia fares
Indian airlines including Air India and IndiGO are requesting government fiscal relief after war-risk insurance costs surged to ₹30–40 lakh ($36,000–$48,000) per narrow-body round trip and ₹90 lakh–₹1 crore ($108,000–$120,000) per wide-body round trip on West Asia routes, translating to ₹20,000–₹35,000 ($240–$420) per passenger. Pakistan’s airspace closure since April 24, 2025 and a 6% fuel price increase in February 2026 have compounded losses, with carriers reporting ₹566.4 crore ($68 million) in combined revenue losses from 1,770 cancelled international flights.
Passengers on India–Gulf routes are already experiencing fares three to four times normal levels on last-minute bookings. Airlines are operating flights to West Asia nearly empty while return flights are fully booked, creating a demand-supply imbalance that makes even 10–12% fare increases insufficient to restore profitability.
The extended West Asia conflict is forcing Indian carriers into a fiscal corner.
War-risk insurance premiums have skyrocketed as airlines navigate closed airspace, reroute around conflict zones, and manage operational complexity that has persisted for nearly 11 months. The Pakistan airspace closure — now the longest in modern Indian aviation history — has eliminated the most direct routing to Europe, the UK, and North America, forcing carriers onto fuel-intensive southern routes that add 2–3 hours to flight times.
The result: fares on Mumbai–Dubai, Delhi–Doha, and Kochi–Muscat routes have surged to levels that price out leisure travelers while barely covering airline costs. Air India has warned that if Saudi Arabia or Oman impose additional airspace restrictions, its long-haul European and North American services could become commercially unviable.
Why insurance costs are crushing airline margins
War-risk insurance — a specialized policy covering aircraft operating in conflict zones — has become the single largest variable cost increase for Indian carriers. A narrow-body aircraft like an Airbus A320 now incurs ₹30–40 lakh in additional insurance per round trip to West Asia, while wide-body aircraft such as the Boeing 777 face ₹90 lakh to ₹1 crore per round trip.
These costs translate directly to passengers. On a typical 180-seat narrow-body flight, the insurance premium alone adds ₹16,600–₹22,200 ($200–$267) per passenger. On a 350-seat wide-body, the per-passenger burden reaches ₹25,700–₹28,600 ($309–$343). That’s before accounting for fuel, crew, or airport fees.
The insurance spike reflects underwriters’ assessment of escalating risk. Iran tensions, frequent airspace closures, and the unpredictable nature of the conflict have pushed premiums to levels not seen since the 2003 Iraq invasion.
| Aircraft type | Insurance cost (₹) | Insurance cost (USD) | Per-passenger cost (₹) |
|---|---|---|---|
| Narrow-body (A320, 737) | ₹30–40 lakh | $36,000–$48,000 | ₹16,600–₹22,200 |
| Wide-body (777, 787) | ₹90 lakh–₹1 crore | $108,000–$120,000 | ₹25,700–₹28,600 |
Between the lines
The insurance figures reveal a structural problem: even if airlines pass 100% of the war-risk premium to passengers, they’re still operating at a loss on outbound flights. Flights departing India to West Asia are running at 20–30% load factors because passengers are avoiding the region, while return flights are fully booked with Indians seeking to exit. This means airlines are spreading the insurance cost across fewer paying passengers on the outbound leg, making the per-passenger burden even higher than the table suggests.
How Pakistan’s airspace closure rewrote the route map
Pakistan closed its airspace to Indian carriers on April 24, 2025, following Operation Sindoor. Nearly 11 months later, the closure remains in effect — making it the longest continuous airspace restriction in modern Indian aviation history. The 2019 Balakot crisis, by comparison, lasted approximately five months.
The closure eliminated the most direct routing for Indian carriers flying to Europe, the UK, and North America. Flights that previously crossed Pakistan now detour south through Saudi Arabia and Oman, adding 2–3 hours to flight times and burning thousands of additional liters of fuel per trip. Air India has flagged that if Saudi or Omani airspace becomes restricted, its long-haul services would require extreme southern rerouting that makes the flights commercially unviable.
The fuel impact is compounded by a 6% aviation turbine fuel (ATF) price increase in February 2026 and the rupee’s depreciation to all-time lows. Combined, these factors have pushed operational costs on West Asia routes 10–12% higher than pre-conflict levels — and that’s before accounting for insurance.
Airlines have requested exemptions from newly-implemented pilot duty hour rules, as rerouted flights now exceed standard flight times and create crew scheduling bottlenecks. The government has not yet responded to these requests.
The empty outbound problem
Airlines are implementing tactical load management to survive the crisis, but the math doesn’t work. Flights departing India to West Asia operate at minimal capacity — nearly empty — because passengers avoid the region due to conflict risk. Return flights from Gulf hubs are fully booked with Indians seeking to exit.
This creates a structural imbalance where airlines cannot achieve revenue-neutral operations even with 10–12% fare increases. The only way to cover costs is to charge remaining outbound passengers 3–4 times the normal fare, which further suppresses demand and perpetuates the cycle.
What airlines are asking the government to do
Excise duty reductions or GST exemptions are the primary relief measures airlines have requested. Carriers argue that the ₹566.4 crore ($68 million) in combined revenue losses from 1,770 cancelled international flights justify temporary fiscal support.
Pilot duty hour exemptions would allow airlines to operate rerouted flights without violating crew rest regulations. Current rules were designed for pre-conflict routing and don’t account for the 2–3 additional hours now required on many services.
Fuel subsidy discussions are ongoing, though no formal proposal has been submitted. Airlines are exploring whether the government would consider temporary ATF price caps or rebates for flights operating in conflict-affected regions.
Watch: The government’s response to these requests will likely come in the next 2–3 weeks, as airlines have indicated they cannot sustain current loss levels beyond the end of March 2026.
What to do if you’re flying India–West Asia
Book 4–6 weeks in advance. Current fares on same-day bookings are 3–4 times baseline levels. Advance bookings still show elevated pricing, but the premium is closer to 10–15% rather than 300–400%.
Monitor Pakistan airspace status. Any reopening could trigger immediate 5–8% fare reductions within 48 hours. Check NOTAM databases at notam.gov.pk and airline advisories for updates.
Consider alternative hubs. Singapore, Bangkok, and Doha offer competitive fares on indirect routings that may offset the direct route premium. Some carriers are pricing these connections aggressively to capture traffic diverted from direct India–West Asia services.
Verify travel insurance coverage. Standard policies may exclude war-risk events. If your trip is essential, confirm that your policy covers cancellations, delays, or evacuations related to conflict zones.
Check airline operational updates daily. Airspace restrictions change frequently. Airlines are posting real-time updates on routing changes, cancellations, and rebooking options on their websites and mobile apps.
Why are return flights from West Asia fully booked while outbound flights are empty?
Indians working or living in Gulf countries are seeking to exit the region due to conflict risk, creating high demand for return flights. Meanwhile, leisure and business travelers are avoiding new trips to West Asia, leaving outbound flights with minimal passengers. This demand-supply imbalance forces airlines to spread fixed costs across fewer paying passengers on the outbound leg, driving per-passenger fares even higher.
Will fares drop if Pakistan reopens its airspace to Indian carriers?
Yes, but the reduction would be gradual. Reopening Pakistani airspace would eliminate the 2–3 hour detour and reduce fuel costs by approximately 15–20% on Europe, UK, and North America routes. Airlines would likely pass through 5–8% fare reductions within 48 hours of reopening, with further adjustments over the following 2–3 weeks as operational costs stabilize.
Are US or European carriers affected by these insurance and routing costs?
Minimally. US carriers like United Airlines and European carriers retain access to Pakistani airspace and are not subject to the same routing restrictions as Indian carriers. However, passengers connecting through Indian hubs to West Asia will face the 3–4x fare increases on the India–West Asia segment of their journey.
What happens if Saudi Arabia or Oman close their airspace to Indian carriers?
Air India has stated that such closures would make its long-haul European and North American services commercially unviable. The airline would be forced to reroute even further south, adding 4–5 hours to flight times and consuming fuel quantities that exceed the aircraft’s maximum payload capacity on some routes. This would likely result in service suspensions rather than fare increases.
