Iran war impact: Lufthansa, Cathay capitalize on Air India’s massive international flight cuts

New Delhi: Air India’s thousands of flight disruptions due to the Iran war and Pakistan’s airspace ban have become a boon for foreign carriers. Lufthansa Group and Cathay Pacific are among those adding service to one of the world’s fastest-growing aviation markets.

With Middle East routes restricted and some travelers wary of connecting to the conflict-hit Gulf, India has become more attractive to international airlines looking to capitalize on strong demand from South Asia to Europe and North America, leading to higher airfares.

According to OAG data, the share of foreign airlines in international scheduled flights originating from India increased to 58.4 percent in the March-May period, from 51.2 percent in the previous year. Air India scheduled 6,404 international flights from India in March-May, down 17.5% year-on-year, and on Wednesday announced widespread cuts for June-August, including on European and North American routes.

For Air India, flight disruptions and the encroachment of foreign rivals represent a blow to its goal of becoming a reliable global airline by adding new wide-body jets, upgrading cabins and adding more non-stop European and North American connections.

“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 it was sold by the government in 2022 and a source familiar with the matter said the group will post record losses of more than $2.12 billion for the 2025-26 financial year. More than 60 percent of the group’s revenue comes from international operations, a second source said. Both spoke on condition of anonymity because the information is not public.

Outgoing Air India CEO Campbell Wilson wrote in a May 1 staff memo that the “tremendous increase” in jet fuel prices “along with airspace closures and longer routes have resulted in many of our international flights becoming unprofitable.”

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

Air India did not respond to Reuters’ questions.

Foreign Airlines Cash Inflow

International air travel has boomed in India, and Air India has historically been favored for seamless connections to major markets, despite persistent customer concerns about its outdated fleet.

According to Cirium data, Air India’s scheduled flights from India to Europe fell 5.1% year-on-year in the March-May period, but US routes suffered the brunt as scheduled flights decreased by 77.4%.

While Emirates kept its India-origin schedule steady at 2,196 flights for the March-May period, European carriers were also among the notable gains: Lufthansa-owned Swiss planned 247 flights from India for the March-May period, up 39% on the previous year, while Amsterdam-based KLM planned 294 flights, up 19.5%.

The increase in Switzerland was largely driven by the Delhi-Zurich route; Scheduled flights on this route increased by 76% to 155 during this period. The airline said it had added a second daily Delhi-Zurich service and was “seeing very strong demand from India to Europe and especially the US”.

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

Cathay During March-May, 588 flights were planned from India to Hong Kong, an increase of 19% compared to last year. Cathay CEO Ronald Lam told Reuters in late March that many Indian passengers who had previously connected via the Middle East were heading to the US via the Hong Kong hub.

But foreign airlines may be limited from adding more flights due to bilateral restrictions that have also hindered the growth of Gulf carriers in India.

Hitting India-USA Travel

Some airlines are launching extensive marketing campaigns to attract Indians; German airline Lufthansa is lighting up Mumbai’s iconic Sea Link bridge with its name in March.

Middle East restrictions for Air India worsened in March when Dubai restricted the number of daily flights to and from foreign carriers’ airports.

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

It suspended Delhi-Chicago flights on Wednesday and also reduced some other US services for June-August. It had suspended flights from Delhi to Washington and from Bengaluru and Mumbai to San Francisco since last year; this helped American Airlines and United Airlines increase their market share on India-US routes.

“Air India can also attract bookings when it offers lower prices,” said Ravi Gosain, President of the Indian Association of Tour Operators. “However, when fares are similar to foreign carriers and routes are longer, passengers tend to choose foreign carriers.”