India’s flag carrier, Air India, has warned the federal government that a prolonged closure of Pakistani airspace could cost it approximately $600 million over 12 months, and has requested state assistance to absorb the financial shock, according to a letter seen by Reuters.

The closure follows a retaliatory move by Islamabad after a recent attack on tourists in Indian-administered Kashmir. In response, Pakistan barred Indian airlines from using its airspace, prompting Indian carriers to reroute several international flights—adding flight time, fuel consumption, and operational complexity.

Air India, which operates a substantial portion of India’s long-haul routes to Europe, North America and the Middle East, is the most affected by the airspace restriction. In its letter dated April 27 to India’s Civil Aviation Ministry, the Tata-owned airline proposed a “subsidy model” to offset projected annual losses exceeding 50 billion Indian rupees (approximately $591 million).

“Subsidy for affected international flights is a good, verifiable and fair option … the subsidy can be removed when the situation improves,” the airline stated, adding that the ban has increased fuel burn and necessitated extra crew deployment on longer routes.

Neither Air India nor the Civil Aviation Ministry has publicly commented on the letter. However, a source with direct knowledge confirmed that the government had requested a detailed assessment from Air India following the closure of Pakistani airspace.

The disruption comes as Air India is undergoing a multi-billion-dollar restructuring under the Tata Group, which re-acquired the airline from state ownership in 2022. The airline is already grappling with delays in aircraft deliveries from both Boeing and Airbus, and reported a net loss of $520 million in the 2023-24 fiscal year on revenues of $4.6 billion.

Air India holds a 26.5 per cent share in the Indian aviation market and is uniquely vulnerable to the current disruption due to its heavy reliance on long-haul routes. In contrast, domestic leader IndiGo, which operates fewer such routes, has less exposure.

According to data from aviation analytics firm Cirium Ascend, Air India, IndiGo and budget carrier Air India Express together had around 1,200 international departures scheduled from New Delhi in April to destinations across Europe, the Middle East, and North America.

The Indian government is said to be actively exploring options to mitigate the impact of the airspace restrictions. These include alternative flight paths over more challenging terrain near Chinese borders and the possibility of offering tax exemptions, according to three sources familiar with the matter.

Air India has also requested the government to engage with Chinese authorities to secure certain overflight clearances, although it did not specify the routes or logistical requirements. Additionally, the carrier has sought approval to carry extra pilots on flights to North America to comply with longer duty hours prompted by extended flying times.

The developments mark a fresh challenge for India's aviation sector, which continues to face operational pressures amid geopolitical tensions in the region.