India shuts airspace to Pakistan: Will this ground PIA for good?

India’s decision to restrict access to its vast airspace for all aircraft linked to Pakistan — including those registered, operated, or leased by Pakistani carriers or the state — has triggered a significant escalation in the ongoing diplomatic standoff between the two neighbours.

The ban, a direct response to Pakistan’s earlier airspace closure for Indian airlines , is being widely interpreted as a strategic move with sweeping consequences for Pakistan International Airlines (PIA), a national carrier already teetering under heavy financial distress.

The airspace restrictions, which came into effect on April 30 and will continue until at least May 23, are poised to severely disrupt select PIA routes to Southeast Asia and further complicate Islamabad’s ongoing struggle to privatise the loss-making airline.

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The background to this tit-for-tat action lies in the terror attack on April 22 in Pahalgam, Jammu and Kashmir , where 26 individuals were killed.

Pakistan’s closure of its own airspace to Indian flights came shortly after the attack, a move perceived by analysts as a preventive step to avoid any potential military response from India.

India formally notified aviation authorities through a NOTAM (Notice to Air Missions): “Indian airspace not available to Pakistan registered aircraft and aircraft operated or leased by Pakistan airlines. These include military flights.”

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The Indian Ministry of Civil Aviation later confirmed the scope of the restrictions, stating that no aircraft associated with Pakistan, whether commercial or military, would be permitted to enter Indian airspace.

The move was widely viewed as a non-violent yet effective means to apply economic and political pressure.

How this move has impacted PIA

For PIA, the timing of the Indian restriction could hardly be worse. The airline is currently operating with fewer than 100 aircraft and has been aggressively trying — and failing — to attract investors in its privatisation bid.

The ban immediately affected six to eight of PIA’s weekly flights that would typically use Indian airspace en route to destinations like Kuala Lumpur and Seoul.

According to International Air Transport Association (IATA) summer schedule data, PIA had approvals for:

• Four weekly flights between Islamabad and Kuala Lumpur,

• Two flights from Lahore to Kuala Lumpur,

• And two more between Lahore and Seoul.

These routes, which now require longer and more circuitous paths through Chinese, Laotian and Thai airspace, face significant delays and increased fuel costs.

Flights to Colombo, Dhaka, Bangkok, and Hanoi are also affected as carriers must now detour around India’s vast territorial airspace, adding both time and expense to their journeys.

Although most of PIA’s 308 weekly international flights are directed toward West Asia — including countries like Saudi Arabia, the UAE, Qatar, Oman and Kuwait — and thus do not usually overfly India, the financial implications of the disrupted Southeast Asian routes are substantial.

Aviation analytics firm Cirium confirms that over 80 percent of PIA’s international services operate to West Asia. These routes remain largely unaffected by the ban. However, flights to Southeast Asia now face substantial logistical hurdles and cost implications.

“The flights originating from Islamabad to Kuala Lumpur of Pakistan International Airlines, which generally take about 5 hours 30 minutes, will now take 8 hours 30 minutes… Any aircraft originating from Pakistan that needs to travel to, say, Bangladesh or Sri Lanka will have to take a longer route over the sea… This will lead to increased flying time, increased operating costs, and increased tickets (prices). This will lead to increased turnaround times and a shortage of aircrew. The same aeroplane will have to be rotated back, which will be further delayed… This will lead to less utilisation of these aeroplanes,” ANI quoted Air Marshal (Retd) Sanjeev Kapoor.

Adding to the operational strain, PIA also announced on April 30 the suspension of all services to and from Gilgit, Skardu and other northern regions. These remote areas, known for poor road connectivity and difficult terrain, rely heavily on air transport.

The halt in flights has disrupted the movement of passengers and goods and raised concern among residents and tourists alike.

Though the airline has not officially disclosed the reason for the suspension, sources within Pakistan’s aviation industry suggest it is part of a broader effort to streamline costs amid growing financial pressures.

How PIA is struggling with privatisation

As the ban takes effect, Pakistan’s latest attempt to privatise PIA enters a critical phase. After two failed efforts in recent years, the government has reopened the bidding process, offering up to 100 per cent ownership and full managerial control to attract serious investors, reported The Economic Times.

The bidding window remains open until June 3, with a final auction expected between October and December 2025.

The first major attempt in October 2024 collapsed after only one bidder — the Blue World City consortium — offered Rs 10 billion, significantly short of the Rs 85.03 billion reserve price set by Pakistan’s Privatisation Commission.

The offer was Rs 75 billion below expectations and was rejected.

In response, the government has made several adjustments, reported The Economic Times. A holding company — PIA Holding Company Limited — was created to offload legacy debt and non-core assets. This restructuring brought PIA’s liabilities down from Rs 864 billion to around Rs 190 billion.

The remaining liabilities include Rs 148 billion in operational debt and Rs 36 billion in employee-related obligations. Non-core assets worth Rs 20 billion have also been separated from the airline’s core operations.

To make the deal more attractive, the government has offered:

• Exemption from the 18 per cent General Sales Tax on leased or newly purchased aircraft,

• Financial support to improve the airline’s balance sheet,

• And protection against certain tax and legal claims.

Revised eligibility criteria now allow both airlines and non-airline businesses to participate, provided they meet updated financial benchmarks.

For instance, non-airline bidders must demonstrate at least Rs 200 billion in annual revenue as shown in audited financials from December 2023 or later.

Still, despite the incentives, the government has struggled to generate investor interest. Industry analysts suggest this is due in part to geopolitical uncertainties, poor legacy performance and a lack of confidence in the airline’s turnaround prospects.

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Denying Pakistani aircraft access to Indian skies not only inflicts economic costs on an already struggling aviation sector but also illustrates India’s capacity to impose asymmetric penalties without crossing military thresholds.

With inputs from agencies