The ongoing Iran War is set to affect India’s aviation sector to an extent that it will lead to an estimated losses of Rs 18,000 crore and a sharp 15–20% drop in inbound tourist traffic.
As per the report shared by the PHD Chamber of Commerce and Industry (PHDCCI) titled ‘Impact of the West Asia Conflict on India’s Tourism, Aviation & Hospitality Sectors’, disruptions in flight operations, shifting travel patterns and rising costs, will lead to losses even as domestic demand continues to provide some cushion.
“These disruptions have increased flying time by 2–4 hours on key routes, leading to a sharp rise in fuel consumption and operating costs. Industry estimates indicate that fuel accounts for 35-40% of airline operating costs and the ongoing situation has further strained airline profitability. The disruption of Middle East air corridors which is among the busiest global transit routes has also reduced connectivity efficiency and increased airfares,” the report said.
Inbound tourism has slowed:
The report highlighted that India’s inbound tourism has slowed, particularly in the leisure segment. This is because the global travellers adopt a more cautious stance amid geopolitical uncertainty.
As per its estimates a 15–20% decline in foreign tourist arrivals. Outbound travel trends are also shifting, with Indian travellers showing a preference for short-haul destinations such as Thailand, Singapore and Vietnam, while demand for long-haul routes and transit-heavy itineraries has softened.
The report suggested several measures to mitigate the impact, including diversifying air routes, improving connectivity, rationalising taxation on aviation turbine fuel and hospitality services, and providing financial support to MSMEs.
Hospitality sector feel the heat:
The report mentioned that in the hospitality sector, the domestic travel demand continues to support occupancy levels, but rising energy costs, higher input prices and fluctuating international demand have put pressure on margins, especially in premium and business hotel segments.
The restaurant and food services sector is also facing challenges, with around 10 per cent of restaurants reported to have shut down and business declining by Rs 79,000 crore per month, report said.
Input costs have risen by 10-15 per cent due to higher prices of imported ingredients, logistics and energy. While domestic demand and food delivery, contributing 20-30 per cent of revenues, are providing some stability, profitability remains under pressure, particularly for small and mid-sized operators, it added.
