Carriers such as the Lufthansa Group and Cathay Pacific have added capacity into India as demand for travel between South Asia, Europe, and North America remains strong, even as rerouted flights and geopolitical disruptions push fares higher.
“Foreign airlines' share of India-origin international scheduled flights rose to 58.4% in March-May, from 51.2% a year earlier,” according to OAG data, underscoring how quickly the competitive balance is shifting.
Air India’s global ambitions under pressure
The pullback marks a significant setback for Air India’s long-term transformation strategy, which has centered on fleet renewal, cabin upgrades, and expanding non-stop international connectivity.
Industry experts say the airline is now being squeezed from multiple directions at once.
“The war has attacked every leg of Air India's transformation plan,” said Linus Benjamin Bauer, global managing partner at aviation consultancy BAA & Partners.
The airline, owned by the Tata Group in partnership with Singapore Airlines, has struggled to return to profitability since its privatization in 2022. One source familiar with the matter said the group is expected to post losses exceeding $2.12 billion for fiscal 2025–26, with more than 60% of revenue still dependent on international operations.
In a May 1 internal memo, outgoing CEO Campbell Wilson pointed to a perfect storm of cost pressures:
“The massive rise in jet fuel prices together with airspace closures and longer flying routes has caused many of our international flights to become unprofitable.”
Air India did not respond to media queries.
Airspace closures and rerouting reshape global routes
The airline’s difficulties intensified after Pakistan barred Indian carriers from its airspace in April 2025 amid diplomatic tensions. The restriction has forced longer detours on key international routes, significantly increasing fuel burn and travel time.
At the same time, rising fuel prices and shifting passenger preferences—especially concerns about connecting through Gulf hubs affected by regional conflict—have altered global traffic flows.
Capacity cuts deepen on Europe and U.S. routes
Data from Cirium shows Air India’s international schedule from India fell 17.5% year-on-year between March and May.
While European routes saw a modest decline of 5.1%, the impact on North America has been severe:
- U.S.-bound flights plunged 77.4% year-on-year
- Delhi–Chicago service has been suspended for June–August
- Several other U.S. routes have been reduced or withdrawn
Some transatlantic journeys now take up to five hours longer due to rerouting constraints.
The airline had already withdrawn several key services, including Delhi–Washington and flights from Bengaluru and Mumbai to San Francisco, creating openings for competitors like American Airlines and United Airlines.
Foreign airlines expand aggressively into India
While Air India retreats, international carriers are expanding capacity to capture surging demand from Indian travelers.
Swiss International Air Lines increased its India flights by 39%, largely driven by higher frequency on the Delhi–Zurich route, which rose 76% to 155 scheduled flights during the period. The airline has also added a second daily service.
“We are seeing very strong demand from India to Europe, and especially to the U.S.,” the carrier said.
Meanwhile, KLM Royal Dutch Airlines boosted India operations by nearly 20%, reflecting rising passenger flows.
Cathay Pacific expanded its India–Hong Kong network by 19%, with CEO Ronald Lam noting that many Indian travelers who once connected through the Middle East are now routing via Hong Kong for U.S.-bound travel.
“Many Indian passengers who had previously connected through the Middle East were heading to the U.S. via its Hong Kong hub,” he said.
Middle Eastern constraints reshape global connectivity
Even traditionally dominant Gulf carriers have had to tread carefully. While Emirates has maintained steady India-origin schedules, broader capacity expansion has been constrained by bilateral limits and operational restrictions.
Dubai’s decision in March to cap daily foreign carrier flights further tightened supply, adding pressure to already stretched long-haul routes.
Airlines court Indian travelers with aggressive campaigns
With India emerging as a critical growth engine for global aviation, carriers are stepping up marketing efforts.
Lufthansa Group has even taken high-visibility promotional steps, including projecting its branding onto Mumbai’s Bandra–Worli Sea Link in March, signalling its intent to deepen engagement with Indian travelers.
Price pressure and passenger choices tilt toward foreign carriers
Industry observers say Air India still attracts demand when it offers competitive pricing, but operational disadvantages are eroding its edge.
“Air India can still attract bookings when it offers lower fares,” said Ravi Gosain, president of the Indian Association of Tour Operators.
“But when its fares are similar to foreign airlines and routings are longer, passengers tend to prefer foreign carriers.”
As geopolitical tensions continue to reshape global air corridors, India’s skies are becoming one of the most contested battlegrounds in international aviation—where capacity, connectivity, and geopolitics now matter as much as price and brand loyalty.