INR 18,000 cr loss reported in aviation industry amid West Asia crisis; inbound dips 15-20%: Report

The PHDCCI report also mentions that hospitality sector continues to remain resilient, supported by domestic travel demand. However, report notes margin pressure due to rising energy costs, increased input prices and fluctuating international demand. The restaurant and food services sector is facing a missed impact; some parts are facing severe operational crisis.

The escalating geopolitical tensions in West Asia have sent shockwaves through the global travel ecosystem, causing significant operational and financial disruptions for India’s travel, aviation, and hospitality sectors. India’s tourism and hospitality sector which contributes to nearly 8% to country’s GDP and support million jobs currently, has seemed to be taken a major hit too.

To quantify and address these mounting challenges, the PHD Chamber of Commerce and Industry (PHDCCI) officially released its Tourism and Hospitality Resilience Report titled ‘Impact of the West Asia Conflict on India’s Tourism, Aviation and Hospitality Sectors’ on April 16, 2026, at PHD House, New Delhi.

Dr. Ranjeet Mehta, CEO & Secretary General, PHDCCI further briefed on the report by shedding light on several important points. The report shed light on the fragility of the aviation sector. As per the report, the aviation sector emerged as the most impacted sector, severely constrained by flight cancellations, airspace restrictions, and international rerouting. The disruptions, particularly driven by soaring aviation fuel prices and route diversions, have culminated in a massive INR 18,000 crore net loss for the industry. Industry estimates indicate that fuel accounts for 35-40% of airline operating costs and the ongoing situation have 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. As per the report, Indian airlines were forced to cancelled approximately 1,770 international flights, representing 46% of their scheduled international operations from February 28 to March 5, 2026.

Consequently, inbound tourism, which is highly sensitive to international mobility, has witnessed a 15-20% decline, particularly in leisure travel.

Anil Parashar, Chair – Tourism & Hospitality Committee, PHDCCI and President & CEO, InterGlobe Technology Quotient further shared that outbound travel has also took slight dip, as Indian travellers now are preferring short-haul destinations such as Thailand, Singapore and Vietnam. He mentioned that domestic tourism continues to flourish, acting as the sector’s primary growth engine and stabilising force.

The report also mentions that hospitality sector continues to remain resilient, supported by domestic travel demand. However, report notes margin pressure due to rising energy costs, increased input prices and fluctuating international demand. The restaurant and food services sector is facing a missed impact; some parts are facing severe operational crisis driven by nationwide commercial energy crisis.

According to the industry estimates aligned with insights from National Restaurants Association of India (NRAI), the sector is facing input cost inflation in the range of 10-15% and 10% restaurants shut, resulting in business losses equating to INR 79,000 crore per month. Mehta also revealed that around 5-6 lakh people have lost their jobs in the hospitality sector due to the ongoing energy disruptions.

Parashar pointed out a stark regional divide regarding the crisis toll on hospitality, noting that 80% of the sector’s impact has been concentrated in South India compared to a 20% impact in North India.

T3 questioned the panel on the long-term contingency plans for the hospitality industry regarding the ongoing LPG shortages, particularly for small hotel chains, standalone businesses and local dhabas that lack the capital to switch to Piped Natural Gas (PNG) or electrical appliances. To this, Parashar stated, “Government and industry bodies are actively stepping in to help. An additional 20% of commercial LPG has been allocated for industrial use to ease the burden.” He added, “In near future, we may see different menus from now.”

As per a recent T3 report, the hoteliers and industry professionals had also highlighted on the hotels already adapting to the change by reducing the menus and moving to alternative fuels.

However, Shalini S Sharma, Assistant Secretary General at PHDCCI offered a grounded perspective on the timeline of these solutions. She acknowledged that at the micro-level, specifically for small-scale hotels and dhabas, this transition and recovery will undoubtedly take time, and changes might be observed in the future.

Report recommendations for immediate future

To mitigate the impact and strengthen sector resilience, the report outlines several key policy recommendations. These include diversifying international air routes and reducing dependence on conflict-prone regions, enhancing bilateral air service agreements to improve connectivity and rationalising taxation across aviation turbine fuel (ATF), hospitality and F&B sectors to reduce cost pressures.

The report also calls for targeted financial support and easier credit access for MSMEs, which form a significant part of the tourism and restaurant ecosystem. Further, it recommends accelerating infrastructure development, improving multimodal connectivity and promoting domestic tourism circuits to sustain demand.

While leisure travel is expected to remain the primary driver of tourism demand in the near term, industry leaders anticipate that corporate travel recovery may progress more gradually, influenced by global business sentiment and economic conditions.

Strengthening digital travel facilitation, visa processes and destination marketing in alternative global markets is also highlighted as critical to offset declines in traditional inbound segments. For the restaurant sector, the report emphasises the need to stabilise supply chains, reduce compliance burdens and support local sourcing ecosystems.

“For India to remain competitive, the focus must now shift towards strengthening global air linkages, ensuring cost-efficient travel access and building greater flexibility into our tourism ecosystem,” suggested Rajan Sehgal, Co-Chair – Tourism & Hospitality Committee, PHDCCI.

“While short-term disruptions in aviation, energy supply and global travel patterns pose challenges, they also present an opportunity to build a more resilient and diversified ecosystem. Strengthening MSME support, ensuring financial stability and fostering industry–government collaboration will be essential to driving sustainable and inclusive sector growth,” added Shashank Bhagat, Co-Chair – Tourism & Hospitality Committee, PHDCCI and Chairman, BI Group.

Despite the current global uncertainties, industry leaders remain cautiously optimistic about the outlook for India’s tourism and hospitality sector over the next 6–12 months. While geopolitical developments may create short-term operational challenges, the report highlights that India’s tourism ecosystem remains well positioned for long-term growth. With coordinated policy support, improved cost competitiveness, enhanced travel facilitation and sustained destination promotion, the sector can continue to contribute significantly to economic development, employment generation and global tourism engagement.