As Iran war jolts Air India, Lufthansa and Cathay pounce on fast-growing market

Published Thu, May 14, 2026 · 12:43 PM

[NEW DELHI] Air India’s thousands of flight cuts due to the Iran war and Pakistan’s airspace ban have become a boon for foreign carriers, with Lufthansa Group and Cathay Pacific among those adding services to one of the world’s fastest-growing aviation markets.

With their Middle Eastern routes curtailed and some passengers wary of connecting in the conflict-hit Gulf, India has become more attractive for international airlines looking to capitalise on strong demand for flights from South Asia to Europe and North America that has led to higher airfares.

Foreign airlines’ share of India-origin international scheduled flights rose to 58.4 per cent in March-to-May period, from 51.2 per cent a year earlier, OAG data shows. Air India scheduled 6,404 international flights from India in March-to-May period, down 17.5 per cent year on year, and announced widespread cuts for June-to-August period on Wednesday (May 13) including on European and North American routes.

For Air India, the flight cuts and encroachment from foreign rivals represent a blow to its ambitions of becoming a credible global airline by adding new widebody jets, upgrading cabins and adding more non-stop Europe and North America links.

“The war has attacked every leg of Air India’s transformation plan,” said Linus Benjamin Bauer, global managing partner at aviation consultancy BAA & Partners.

Air India, owned by Tata Group and Singapore Airlines, has never reported a profit since being sold by the government in 2022, and for fiscal 2025-26, the group is set to post record losses of over US$2.12 billion, a source familiar with the matter said. More than 60 per cent of the group’s revenue is from international operations, a second source said. Both spoke on condition of anonymity because the information was not public.

In a staff memo on May 1, outgoing Air India CEO Campbell Wilson wrote 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.”

Pakistan has banned Indian airlines from using its airspace since April 2025 due to diplomatic tensions, forcing costly reroutings.

Air India did not respond to Reuters’ queries.

Foreign airlines cash in

International air travel has boomed in India, and Air India – despite regular customer angst about its old fleet – has historically been favoured for non-stop links to major markets.

Air India’s scheduled flights from India to Europe fell 5.1 per cent year on year in March-to-May period, but its US routes bore the brunt as scheduled flights plunged 77.4 per cent, according to route-level Cirium data.

While Emirates has held its India-origin schedule steady at 2,196 flights in March-May, European carriers were among the notable gainers: Swiss, owned by Lufthansa, scheduled 247 flights from India during March-May, up 39 per cent from a year earlier, while Amsterdam-based KLM scheduled 294, up 19.5 per cent.

Swiss’ increase was driven mainly by the Delhi-Zurich route, where scheduled flights rose 76 per cent to 155 in the period. The airline said it added a second daily Delhi-Zurich service and was “seeing very strong demand from India to Europe, and especially to the US”

KLM said it had seen an increase in Indian passengers on its flights amid the Middle East crisis.

Cathay scheduled 588 flights from India to Hong Kong during March-to-May period, up 19 per cent from last year. Cathay CEO Ronald Lam told Reuters in late March that many Indian passengers who had previously connected through the Middle East were heading to the US via its Hong Kong hub.

But further flight additions by the foreign airlines could be limited by bilateral caps that have also curbed Gulf carriers’ growth in India.

Hitting India-US travel

Some airlines are rolling out extensive marketing campaigns to lure Indians, with German carrier Lufthansa in March lighting up Mumbai’s iconic Sea Link bridge with its name.

For Air India, the Middle East restrictions worsened when Dubai in March capped daily flight numbers to its airports by foreign carriers.

The Indian airline has also faced headwinds on US routes, where some journey times have increased by nearly five hours due to airspace restrictions.

On Wednesday, it suspended its Delhi-Chicago flights and reduced several other US services for June-to-August period. It had already stopped its flights from Delhi to Washington, and Bengaluru and Mumbai to San Francisco since last year, which helped American Airlines and United Airlines bolster their market share on India-US routes.

“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.” REUTERS