India-Pakistan conflict to hurt travel more than tariffs: regional airport association chief

Business Times

13-05-2025

[SINGAPORE] Tensions between India and Pakistan are expected to hurt air travel more than US tariffs, though falling jet fuel prices could aid airlines, said Stefano Baronci, regional head of a global association for airports.
Beyond 2025, the outlook for the aviation industry in the Asia-Pacific and the Middle East is positive, said the director general of Airports Council International (ACI) Asia-Pacific and Middle East.
This is as the region is expected to lead the globe in air travel growth, while its airports are due to spend US$240 billion on infrastructure.
'Asia is and will continue to be strong in terms of growth... (not) only in the present, but even looking at the medium and longer term,' he said at a media roundtable held in Singapore by Changi Airport Group.
On the Trump administration's on-again-off-again tariffs, Baronci said these could have long-term effects on air travel, but the immediate effects are much less clear.
As air travel is a service, not a good, it is not directly affected by the tariffs.
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Rather, the tariff effects 'depend on discretionary spending, which may be impacted by risk of inflation eating into consumer spending power and shaking traveller confidence', he said, adding that this has yet to materialise.
On May 12, the US and China paused their trade war for 90 days, with reduced tariff levels. While this is of course preferable to the higher levels introduced in April, Baronci noted that uncertainty remains.
Risks and costs
Rather than the tariffs, two major factors that will directly influence air travel in 2025 – but in opposing ways – are India-Pakistan tensions and lower fuel prices.
After missile strikes by India on Pakistan in early May, both countries have closed their airspace multiple times in the past weeks. Major airlines have avoided flying over Pakistani airspace, taking longer diversions across the Arabian Sea and Central Asia.
This has meant longer flights and higher congestion, translating into delays and higher costs, said Baronci.
Unlike tariffs, these effects can be 'tangibly estimated', he added, citing media reports that Air India faces a US$600 million hit from airspace closures.
A truce brokered on May 10 meant Pakistan airspace has reopened, but media reports said normal flight operations would not recommence immediately as aircraft and equipment had been moved to safer areas.
In contrast, airlines could benefit from a fall in jet fuel prices, which could mean lower airfares and higher demand for travel, said Baronci.
For the week ended May 9, jet fuel was US$79.73 a barrel, some 19.5 per cent less than the preceding year's average, said the International Air Transport Association.
Outlook positive
For 2025 and beyond, the region's air travel outlook is still bullish, said Baronci, citing ACI data on its growth.
Asia-Pacific's forecast compound annual growth rate for air passenger traffic is 4.7 per cent for 2024 to 2033, the second-highest behind the Middle East at 4.9 per cent, compared with 3.8 per cent for the entire world.
An ACI survey of 30 major airports across the two regions showed an expected capital expenditure of US$240 billion in aviation infrastructure in the next decade.
Of this, US$136 billion will be invested in upgrading existing airports, with US$104 billion more for new developments.
This will result in the addition of around 1.2 billion in annual passenger capacity and 71 million tonnes of annual cargo capacity.