India’s airlines are being squeezed from two directions at once, and the industry’s own language has started to run ahead of the facts. Pakistan’s airspace has been closed to Indian aircraft since 24 April 2025, forcing longer, costlier routes to Europe and North America. Now a 2026 jet-fuel price spike, driven by the Iran war and the closure of the Strait of Hormuz, has piled a second shock on top of the first. Carriers and their lobby group have warned the industry is close to collapse. No major Indian airline has actually stopped flying.
A ban that keeps getting renewed
Pakistan shut its airspace to Indian aircraft on 24 April 2025, in retaliation during that year’s India-Pakistan crisis. What was meant to be a short, punitive measure has since become a fixture of the regional aviation map: the ban has been extended on a rolling monthly basis ever since, most recently through 24 October 2026, and the next extension decision is due this week, according to TechJuice’s reporting on the NOTAM cycle that governs it.
The economic toll has fallen overwhelmingly on India. Losses to India’s aviation industry from the ban are estimated at roughly $2 billion so far, citing figures from the Pakistan Airports Authority, and the credit rating agency ICRA has warned of a further $600 million in losses in 2026 if the closure continues, according to AVI-GO. Pakistan’s own The News newspaper has noted that the restrictions have hit India’s aviation sector far harder than Pakistan’s, since Indian carriers lose the shorter western routings that Pakistani airspace once offered while Pakistani airlines have comparatively little exposure to the India market.
Air India has felt this most acutely. The carrier has reportedly proposed a “subsidy model” to the Indian government, estimating its own losses at more than $591 million for every year the ban continues, according to Outlook Business. That single figure gives some sense of why the airspace closure, well over a year old now, has become a recurring subject of lobbying in New Delhi rather than a problem airlines have simply absorbed and moved on from.
Then came the fuel shock
If the airspace ban was the slower-burning pressure, the fuel crisis arrived fast. In April 2026, the Federation of Indian Airlines, which represents Air India, IndiGo and SpiceJet, warned that the industry was close to shutting down operations entirely because of jet fuel costs driven up by the Iran war and the closure of the Strait of Hormuz, according to the South China Morning Post.
The federation returned to the Indian government again this month for relief, saying jet fuel has risen from roughly 30 to 40 percent of airline operating costs to 55 to 60 percent, according to the Free Press Journal. For an industry that already runs on thin margins, a cost base swinging that heavily toward a single volatile input is, on its own telling, close to unmanageable alongside a transit route that remains closed.
Real retreat, not collapse
The combined pressure has produced a genuine, measurable retreat. Air India cut 29 international routes between June and August 2026, citing both airspace restrictions and record fuel prices, according to Infrastructure Today. The carrier is also dropping its direct Vienna-Delhi service at the end of October. IndiGo is ending its Chennai-Réunion route, with a final flight scheduled for 21 October.
What hasn’t happened is an actual airline collapse. The one outright closure on record is Dove Airlines, a small Kolkata charter operator that entered voluntary liquidation in January 2026. It is weak evidence for a wider “airlines are closing” narrative: Dove hadn’t flown a single commercial service since 2022, and its liquidation reflects years of dormancy rather than the current squeeze.
That gap between the rhetoric and the record matters. “On the verge of closing” is industry and lobbying language, a case airlines and their federation are making to press the government for fuel-tax relief, route subsidies or some other form of support, much as Air India’s own subsidy proposal does. The warnings are not fabricated; the losses, the fuel-cost share and the extended NOTAM cycle are all real and well documented. But no major Indian carrier, Air India included, has ceased operations. What has happened instead is a trimming of the network: routes cut, a handful of international services dropped, and sustained pressure applied in Delhi for financial relief.
What to watch
Two decisions now sit on the calendar. Pakistan’s authorities are due to decide this week whether to extend the airspace ban past 24 October, a call that has effectively been rubber-stamped on a monthly basis for a year and a half. And the Indian government has yet to respond publicly to the Federation of Indian Airlines’ latest appeal over fuel costs. Neither decision is likely to resolve the squeeze outright, but either could ease it, or deepen the case airlines are already making that they are being run closer to the edge than at any point since the pandemic.∎
