Geopolitical Tensions Divert Indians To Domestic Tourism, But Rising Airfares And Hotel Rates Force Travellers To Cut Down Itinerary

Mumbai, May 8: The Indian aviation sector, once the poster child for post-pandemic recovery, is currently navigating its most severe period of clear-air turbulence in recent memory.

A volatile cocktail of escalating West Asian geopolitical tensions, persistent supply chain bottlenecks and skyrocketing operational costs is now threatening to derail the momentum of India’s domestic tourism sector.

Industry faces turbulence amid geopolitical tensions

As the industry reflects on FY26 performance, the numbers tell a sobering story. What was anticipated to be a year of record-breaking expansion has instead been marred by internal and external shocks, according to industry analysts.

After the West Asia war escalated geopolitical tensions, the aviation industry took a major hit with airspace closures and rising aviation turbine fuel prices.

ICRA revises aviation outlook to negative

Rating agency Investment Information and Credit Rating Agency of India revised its outlook for the Indian aviation industry from ‘stable’ to ‘negative’, estimating muted growth in domestic travel at 0 to 3%.

In March, The Free Press Journal reported that India's outbound tourism sector saw cancellations of around 60% to 80% of overseas travel. Tour operators estimated that a significant proportion of outbound travellers may shift to exploring domestic destinations amid rising international travel costs.

Rising airfares impact domestic tourism

While industry experts reiterate that demand has increased, they also note a rise in hurdles for domestic tourists. Rising domestic airfares, stemming from higher aviation turbine fuel prices and airline fuel surcharges, are proving to be a stinging factor for tourists, forcing them to cut costs in their itineraries.

The chairman of the Travel Agents Association of India (TAAI)’s airline council, Sameer Karnani, said that tourism within India and to the East has flourished, but package prices have risen by at least 15% due to rising airfares.

He stated that even hotels have increased their package rates due to high demand and rising cooking gas costs.

Tourists cutting down on travel plans

“While many groups absorb the increased expenditure, a lot of them are cutting down on their itinerary by reducing the number of days. If a person is used to travelling by air, they won’t travel by train; therefore, they have to choose either to bear the surge price or to cut down on their plans,” he said.

Mumbai-based Kumar Verma, the director of travel company Saturday Script, said people are accepting the challenges of higher package rates but compromising on travel quality.

He said that for multiple destinations, the flight cost has increased to nearly 50% of the total package cost, up from the usual 15% margin, forcing people to look for alternative modes of transport or other cost-cutting measures.

“People can accept higher airfares for visiting a new country but not for domestic travel. They are either completely or partially shifting to train travel. Many of them are also cutting down their expenses by opting for a shared coach instead of a private car,” Verma said.

Airlines expected to cut operations

Air India is expected to significantly cut down on its flight operations due to rising aviation turbine fuel prices, which have increased operational costs. Tour operators fear that such a situation will force airlines to raise ticket prices, thereby reducing domestic and international travel.

They believe the situation requires immediate action, as timely solutions and official backing will determine whether it becomes a major crisis.

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Travel agents report customer anxiety

Indian Association of Tour Operators president Ravi Gosain said, “Travel agents are already seeing customer anxiety because budget-sensitive travellers have started showing signs of concern. Flight schedule changes and unexpected fare increases create problems that lead to travel cancellations and extra costs for both travellers and their travel partners.”

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