Global airlines cancel flights to the Gulf, but Indian carriers struggle to take advantage

Air travel is slowly ramping up in West Asia following a fragile ceasefire between the US and Iran. The UAE, Kuwait, Bahrain, Oman, and Qatar have either begun opening all of their airspace or have already fully reopened for operations—a signal that things may soon return to normal, even as the agreement between the two warring parties remains in limbo.

A large chunk of European and American operators with a presence in West Asia have suspended operations, including American Airlines, United, Lufthansa, Swiss, British Airways, and Air France. While these carriers have previously railed against West Asian hub carriers, they maintained a presence in the region—either in partnership with the local airlines or as part of their networks—to funnel passengers into their systems, largely driven by major global alliances like Star Alliance, Oneworld, and SkyTeam.

Indian carriers, especially Air India, are in the middle of the world’s largest turnaround. Also, IndiGo has massive global ambitions. Yet, they are
unable to take advantage of the situation.

Indian carriers maintain a massive presence in
West Asia; in some cases this accounts for as much as 50 per cent of their total international capacity. However, transiting via India to Europe requires a circuitous route that backtracks in the opposite direction and adds valuable hours to travel times. Passengers must then either fly over conflict-ridden airspace or bypass it entirely, as Indian carriers have faced constraints using Pakistani airspace since April last year.

Indian carriers themselves are cutting flights, with Air India scaling back massively on both short-haul and long-haul international operations. This is primarily driven by high oil prices that have refused to climb down as regional tensions continue. Furthermore, for over a year, Air India’s flights to North America have been forced to make technical stops, stripping the carrier of the competitive edge it once held as a non-stop operator. Combined with an older product and a lack of Wi-Fi on most aircraft, the airline cannot realistically command a premium just yet.

IndiGo, on the other hand, is operating damp-leased Dreamliners from Norse Atlantic, which introduces a different set of complications. Because these aircraft are registered in Europe, they are guided by European regulatory rules even while operating for IndiGo. Consequently, they cannot fly over Pakistani airspace and face restrictions regarding which airspaces they can enter during the conflict, leading to longer cancellation cycles in some cases.

Tremendous stress

Data from global transport body IATA’s Jet Fuel Price Monitor shows that the price of Aviation Turbine Fuel (ATF) has jumped 83 per cent in the Asia-Pacific region compared to the same period last year. With fuel comprising over 40 per cent of total operating costs for airlines, especially in India, the stress on balance sheets has multiplied.

If fuel prices are a major headache, an equal worry is the sliding rupee, which has been hitting new lows against the US dollar with each passing day. Because aircraft lease rentals are dollar-denominated, another significant chunk of expenditure is rising without a matching increase in earnings. There is a limit on how much of this cost can be passed on to the end customer, given that travel demand is currently soft.

This leaves Indian airlines with little choice or room to manoeuvre; the focus has shifted firmly to baseline survival rather than capturing the traffic left behind by retreating foreign carriers. This is already reflecting in the data: international traffic at Delhi, Air India’s primary hub, dropped 7.5 per cent in March, with April data still awaited.

Uncertain times

The massive East-and-West networks of the major West Asian carriers have also been fractured by the ongoing crisis. However, no Indian carrier possesses a seamless enough network to scoop up what their West Asian rivals are leaving on the table. Total travel times via India remain much higher than the competition, making a transit through Delhi or Mumbai a tough sell for most passengers. In times like these, many travelers choose non-stop flights or opt for layovers entirely outside the conflict zone—which explains why some European carriers are actually adding frequencies to Indian cities.

With
Air India’s massive capacity cutbacks announced just days before taking effect, forward passenger loads are clearly not building as strongly as they normally would. Air India has reached a point where cutting its losses is a higher priority than flying its schedules. In this environment, leaving a lower-utilised asset on the ground loses less money than operating it. How long this holding pattern will last remains to be seen, or is something bigger in the offing?