Pakistan Faces Huge Financial Loss After Closing Airspace to Indian Airlines

In the wake of escalating tensions following the Pahalgam attack in late April 2025, Pakistan imposed a sudden ban on Indian-registered aircraft, barring them from using its airspace. While intended as a strategic move, this decision has backfired—inflicting severe financial damage on Pakistan itself by decimating revenues from overflight fees. Let’s explore the full story in detail.

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Background: Rising Tensions & Strategic Retaliation

On April 22, 2025, the Pahalgam attack claimed the lives of 26 people, most of them tourists. In reaction, India took a firm stance and suspended its part of the Indus Waters Treaty, a crucial bilateral accord on water sharing. Pakistan deemed this suspension an “act of war” and responded by shutting its airspace to all Indian carriers starting April 24, 2025 .

The flight ban was part of a broader escalation during what came to be known colloquially as “Operation Sindoor.” It affected not just civilian but also military traffic, causing significant regional disruption .

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Direct Economic Impact on Pakistan

Overflight Fee Revenue Collapses

The Pakistan Airports Authority (PAA) saw a dramatic plunge in its overflight income. Between April 24 and June 30, 2025, losses exceeded ₹1,240 crore—a drop heralded in the Ministry of Defence’s report to the National Assembly, with daily transit traffic falling by nearly 20%, affecting 100–150 Indian flights each day .

Then, a follow-up report for the period June to August 2025 revealed an additional ₹123 crore lost—bringing the total loss from overflight fees to around ₹1,363 crore over just over two months .

Let’s put this into perspective:

₹1,363 crore = 13.63 billion rupees, equivalent to approximately $165 million USD (using an approximate exchange rate of ₹83 per USD).

This financial blow is reportedly even more severe than Pakistan’s 2019 airspace shutdown, which during a five-month stretch cost them nearly ₹548 crore .

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Broader Operational & Geopolitical Fallout

Regional Flight Disruptions & Retaliatory Measures

Pakistan briefly extended the ban to all international carriers, including its own national airline, Pakistan International Airlines (PIA), shutting its skies completely for 48 hours .

The Indian response went beyond aviation: 27 airports in northern and western India were closed temporarily, forcing cancellation of over 430 flights and disrupting operations of both Indian and foreign airlines .

This created ripple effects across South Asian aviation networks, with international carriers rerouting flights and sectors recalibrating schedules mid-crisis.

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Why Did Pakistan Hurt Itself?

Overflight Fees: A Profitable Stream It Cut Off

Pakistan’s airspace serves as a strategic transcontinental corridor. A large share of westbound and transcontinental flights from India—used by Air India, IndiGo, Akasa Air, and more—regularly fly over Pakistani airspace to reach Europe, the Middle East, and North America .

With the closure, these flights either had to take longer detours over the Arabian Sea or route through other countries like Iran or China. That caused severe economic fallout not just in fuel and operational costs for Indian carriers but, crucially, in lost overflight fees for Pakistan .

The Human and Logistical Toll

Though Pakistan was the primary loser, the blockade also hurt Indian aviation:

Air India reported daily losses of ₹20 crore (~₹200 million) due to rerouting, longer flight durations, and increased fuel and labor costs .

Over eight days, Indian carriers collectively suffered losses exceeding ₹170 crore (~₹1.7 billion) .

The estimated extra monthly cost spurred by longer routes surpassed ₹307 crore (~₹3.07 billion) per month .

One report estimated a staggering ₹7,000 crore (~₹70 billion) annual loss across Indian carriers if the ban persisted—Air India alone facing nearly ₹5,000 crore, and IndiGo around ₹1,300 crore .

Regrettably, prolonged flight durations and extra stops provided cause for fares to creep up, prolonging passenger inconvenience and financial repercussions .

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Final Verdict: Pakistan Pays a Hefty Price

What began as a retaliatory move during a period of intense geopolitical strain has backfired economically on Pakistan. Here’s a concise breakdown:

Period Loss in ₹ crore Remarks

April 24–June 30 ₹1,240 crore Massive overflight revenue loss
June–August (2 months) ₹123 crore Continued decline in overflight income
Total ₹1,363 crore (~$165M) Approx. ₹13.63 billion rupees from overflight fees

Pakistan’s aviation sector—and broader fiscal standing—took a serious hit as Indian airlines were forced to reroute flights miles away from Pakistan’s skies.

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Closing Thoughts

Sometimes, smart politics can unintentionally catalyze self-harm in the economic realm. Closing airspace may seem a powerful symbolic act, but when that airspace is a significant source of revenue, the consequences can be extremely costly.

Pakistan’s decision in April 2025, under the banner of Operation Sindoor, appears to have resulted in a self-inflicted wound amounting to ₹1,363 crore in just a couple of months—the equivalent of hundreds of millions of USD.

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