Iran war impacts India's aviation sector; fuel costs, route diversions key concerns: EY

New Delhi: The ongoing geopolitical conflicts in West Asia are beginning to exert a measurable impact on India's aviation sector, affecting both airlines and airports through rising fuel costs, operational disruptions, and revenue uncertainties, according to an analysis by EY India.

The report highlights that nearly 20 per cent of global jet fuel supply is linked to the Middle East, making the region critical for aviation economics. As a result, volatility in fuel prices has once again emerged as the most significant cost factor for airlines.

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In addition to cost pressures, airspace restrictions in the region are forcing airlines to reroute flights, increasing travel distances by up to 10-15 per cent on major international corridors. This has led to higher fuel consumption, increased crew expenses, and greater operational complexity for carriers.

Airports are also facing challenges due to shifting traffic patterns. The disruptions have resulted in uneven passenger flows and pressure on transit connectivity, particularly at major hub airports. These changes are impacting both aeronautical revenues and non-aeronautical streams such as retail and services.

According to the analysis, non-aeronautical revenues contribute between 40 and 60 per cent of total income at large airports, making them highly sensitive to passenger mix and dwell time. Even minor shifts in international transit traffic can therefore have a notable financial impact.

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In the short term, EY noted that the aviation sector is likely to manage these disruptions. However, if geopolitical instability persists over the next six months, it could lead to structurally higher costs, including fuel, insurance, and regulatory compliance expenses.

The report advises aviation stakeholders to adopt scenario-based planning and diversify revenue streams, particularly by strengthening cargo operations and commercial activities. Investments in digital capabilities and operational resilience are also recommended to maintain service reliability and protect profit margins.

Looking ahead, EY emphasised that geopolitical risks are no longer peripheral but are becoming a central factor in aviation strategy. Over the long term, airlines and airports will need to embed flexibility, resilience, and diversification into their network planning and operating models.

"Geopolitics is evolving into a core design constraint for the aviation sector and could also serve as a source of competitive advantage for resilient operators," the report noted.

The analysis underscores the need for India's aviation ecosystem to adapt proactively to an increasingly uncertain global environment, balancing operational efficiency with strategic preparedness.