India’s Operation Sindoor 2.0 was launched as a payback for Pakistan’s missile and drone attacks conducted late evening on May 9 (Thursday) to destroy over 15 sites across Jammu and Kashmir, Punjab, and Rajasthan. There was a complete blackout declared in the respective sites while the Indian armed forces intercepted the missiles and drones, ensuring no harm was caused to any of the target points and the residents located there.
This incident followed Pakistan’s attempt to target Northern and Western India using drones and missiles on Wednesday night. To this, the Indian Armed Forces retaliated and targeted Air Defence Radars and mechanisms at different locations in Pakistan, with the confirmed news of the Air Defence system at Lahore being successfully neutralised. While the India-Pakistan tensions are at a rise, some industries, especially airlines, have been adversely affected by these frequent disturbances, thereby causing a significant drop in the stock prices.
Airlines Sector – The Current Scenario
The series of events in the last two days has developed a sense of fear in the travellers, leading to travel cancellations, flight cancellations, high alert at airports, route restrictions, and lowered discretionary spending as the war shadow looms. The change in the travel plans has affected multiple sectors, including the hospitality players, but the major impact has been seen on the airline industry. The evening attacks on Thursday, May 9, led to the shutdown of 24 airports in India, including Chandigarh, Srinagar, Amritsar, Ludhiana, and Bhuntar.
An advisory was released, requesting passengers to make travel plans concerning the current situation and also be prepared for stricter security checks at the airport. The initiatives taken by the aviation sector in India appeared as a warning for passengers to be alert and ensure safety on their end. These headwinds have affected the airline stocks in India negatively, thereby triggering a huge drop in the airline stock prices of the most reputable sector players.
A broader aviation sector seems to have been affected, with estimates suggesting that Indian airlines collectively face an additional monthly operational cost exceeding ₹306 crore due to rerouted flights and extended travel times. International carriers have similarly adjusted their routes to avoid affected airspace, leading to longer travel times and potential delays.
Airlines Shares: The Effect of the India-Pakistan Tensions
The current geopolitical tensions between India and Pakistan have led to significant operational and financial challenges for airlines in the region. Investors should carefully consider these factors when evaluating the aviation sector’s performance and potential investment opportunities.
Following military confrontations, several Indian airports were closed, and airlines like IndiGo [NSE: INDIGO], Air India, SpiceJet [NSE: SPICEJET], and Akasa Air suspended or cancelled numerous flights. IndiGo alone cancelled 170 flights due to airspace restrictions, along with Air India group and Spicejet cancelling around 115 and 35 flights, respectively. Indigo shares slipped to 4% on May 8, 2025, while Spicejet airline stock prices fell to 3.7%.
Is This Time to Buy the Dip?
The geopolitical impact on stocks triggered a sharp sell-off in regional airline stocks. While the immediate outlook indicates operational disruptions, such as airspace closures and cancelled flights, the long-term fundamentals still seem relatively intact.
IndiGo, India’s largest airline, posted a Q3 FY25 net profit that plunged 18% to ₹2,449 crore, driven by high fuel and maintenance costs, but with a year-on-year revenue recorded at 8.6%, indicating confidence in future demand. The carrier continues to expand aggressively, having grown its fleet by nearly 20% in the past year.
Despite these geopolitical headwinds, domestic passenger demand remains strong, and airlines are betting big on future growth. IndiGo’s 500-aircraft order signals long-term optimism.
- If tensions ease, the sector could rebound quickly as demand remains robust and structural growth drivers are intact.
- If geopolitical instability lingers, elevated costs and reduced capacity could erode margins further.
While the dip may present an entry point, investors should tread carefully, balancing near-term risks against the sector’s long-term recovery potential.
Conclusion
While the current situation poses short-term challenges for the airline industry, investors should assess the long-term implications. Factors such as geopolitical stability, operational resilience, and market demand will play crucial roles in determining the sector’s recovery trajectory. It’s essential for investors to stay informed and consider diversifying their portfolios to mitigate risks associated with such geopolitical events.
The India-Pakistan tensions have disrupted airline operations and affected stock market performance. Investors should carefully evaluate the situation and consider both short-term challenges and long-term opportunities within the airline industry.
