Air India faces ₹4,000-crore hit from Pak airspace closure: CEO Campbell Wilson

New Delhi/Mumbai: Tata Group’s Air India faces a ₹4,000-crore ($500 million) hit from the closure of Pakistan’s air space from June 2025 following that country’s short military conflict with India the previous month, its top executive said at an event in New Delhi on Wednesday.

“That’s clearly a big sum in anyone’s book,” Campbell Wilson, the airline’s chief executive, said at the Aviation India and South Asia 2025 conclave. “It isn’t something that anyone had anticipated. It literally came out of the blue.”

To be sure, the airline had quoted a higher ₹5,000 crore number to the aviation ministry in May. A company spokesperson said the earlier number was a rough estimate given to the government after a meeting with the aviation ministry. Since then, Air India has taken some mitigation measures to cut down losses for long-haul international routes that would otherwise have used Pakistani airspace, effectively pruning the loss, the spokesperson added.

The news comes amid ongoing business challenges for Air India, which is undergoing a transformation led by Wilson.

“We were hit by a few unprecedented things this year, which are almost Black Swan events,” he said. “Aside from the A171 accident, there was the war with Pakistan, closure of Middle East airspace, 50% tariff on India by Mr Trump, and constraints on H-1B visas. All of these are quite unprecedented shocks to the system.”

According to data from Tata Sons’ annual report, for the year ended 31 March 2025, Air India saw revenues increase to 15% to ₹78,636 crore from FY24 (combining revenues of Air India, Tata SIA Airlines and Talace), making it amongst the largest contributors to Tata Group topline.

However, the airline was the largest loss maker for the group in the just gone-by financial year with losses widening to ₹10,859 crore. Talace and Tata SIA were merged last financial year.

Comparatively, market leader IndiGo revenue of ₹80,802 crore, and a net profit of ₹7,258 crore for the previous fiscal, data from stock exchange filings showed.

Challenges along the five-year plan

After joining Air India in May 2022, Wilson had outlined a five-year transformational plan called Vihaan-AI. Currently, Air India is in the third stage of this plan, called the ‘climb’ phase, following the initial ‘taxi’ and ‘take-off’ phases.

The climb phase started around 2024 and focuses on achieving operational excellence, expanding the fleet, and enhancing the customer experience by introducing new products, improving reliability, and expanding the network.

However, the plan has taken some beating from external events, prompting Wilson to say the business environment continued to be “quite challenging” in 2025.

Airspace closures have forced the airline to reroute flights and reduce capacity on its long-haul segments, particularly affecting flights to the key markets of North America and Europe. The two regions account for nearly 25% each of its international operations. International routes account for 60% of Air India’s flights.

In June, Air India grappled with the deadly Ahmedabad crash, which led to fewer international departures. The airline also reviewed its practices after the incident, in which all 12 crew members and 229 of the 230 passengers aboard died.

Then, in the winter schedule for airlines (beginning 6 October 2025) announced last week, Air India was the only major carrier to have reduced operations, with flights down 10%, while Air India Express is growing at 11% based on weekly departures allocated.

Air India’s transformation plan also faces supply-chain challenges, which delay aircraft deliveries and lengthen refurbishment timelines.

Refurbishment of the legacy wide-body fleet and introduction of new wide-body aircraft are critical pillars of Air India's upgraded service offering, but are currently constrained by global supply-chain slowdowns in aircraft interiors, seats and components—a hangover from the pandemic.

According to Shobit Singhal, associate director of Anand Rathi Institutional Equities, Air India's losses widened to ₹10,859 crore in FY25 from a combined loss of ₹7,356 crore the previous year. Both airport closures and the Ahmedabad crash worsened the airline's situation while also harming consumer sentiment and trust. The total number of passengers Air India carried declined by 11% year-on-year in July and 8% year-on-year in August.

“However, recovering from that blow, the airline revived and restored its international flight schedule on 1 October (after a safety pause initiated in July). This, coupled with strong demand revival in H2FY26, is likely to somewhat compensate for the losses in H1. Over a longer period, Air India might gradually improve its profitability due to its strong Tata Group backing as well as an existing order book of 514 aircraft, subject to timely deliveries,” Singhal added. Key risks are supply-chain disruptions, particularly for Boeing, as well as the airline’s ability to ramp-up daily departures, especially domestic ones, he added.

Mergers and acquisitions

Tata Group’s acquisition of Air India was finalised in January 2022 for ₹18,000 crore ($2.2 billion). It was part of government divestments and included Air India, Air India Express and AI SATs.

In 2024 the Tatas merged Air Vistara – which had been run as a joint venture with Singapore Airlines – with Air India. Another low-cost carrier, AIX Connect (former Air Asia India), was also merged with Air India Express that year. Air India and Air India Express have a combined share of around 27% in the domestic market. Indigo is the clear market leader with a 64% share.

Currently, Singapore Airlines has a 25.1% stake in Air India and the remaining is held by Tata Sons.