Indian operators are facing a new storm since the Pakistan government on Thursday announced closing its airspace for Indian commercial carriers. It has led airlines such as Air India, IndiGo, Akasa Air and SpiceJet to reroute flights. Today, these routes link India to the eastern and western US seaboards, Europe, Central Asia, and the Middle East.
The closure also unnecessarily burdens Indian airlines, making them take longer routes. As the flights move further along their routes this change makes their travel much more costly. The airspace closure adds pressures on an airline industry still dealing with the jolt of increasing operational costs. According to industry experts, airlines can expect to accrue higher costs. Thanks to the competitive nature of air markets, passengers won’t likely feel much of an impact in the form of higher airfares.
The ramifications of this airspace restriction are notable. To his credit, one spokesperson for one Indian airline smacked this nonsense down hard. They highlighted that rerouting flights along the new paths will lead to longer travel times for passengers and increased operational costs. Airlines will probably eat some of these costs in order to avoid raising ticket prices for travelers.
“American First” – U.S. President Donald Trump’s ideology
President Donald Trump just signed an executive order to that effect. This order—which is intended to facilitate the reintroduction of dangerous deep-sea mining practices—reverses course. This much-debated step aims to increase American access to key minerals like nickel, copper, and rare earth elements. These materials are critical for multiple industries, from technology to defense.
China dominates the supply chain for many of these critical minerals today. Such dominance places the U.S. at strategic and tactical disadvantage. China is the top or second largest trade partner of most Southeast Asian nations. As a result, it is critical for these countries to broaden their export markets. To combat increased export costs to the U.S., Chinese manufacturers have started idling production and laying off employees in response.
Faced with increasing economic pressure due to U.S. tariffs, China is already implementing support measures for their beleaguered industries. Politically, the pressure on the Chinese government to make interest rate cuts happen quickly is overwhelming. They are defending against what they call an uptick in external shocks. This shift indicates China’s desire to cool down its own economy amid the stresses created by U.S. trade policies.
At the same time, Southeast Asian countries are cooperating to strengthen intra-regional trade. These countries increasingly want to rely less on external markets. To that end, they are busy competing against one another for economic development opportunities. This trend would greatly impact the regional trade landscape and open the door for new economic development opportunity.
“Reciprocal” – Trump’s tariffs
The U.S. is doing everything it can to shore up its strategic partnerships in Southeast Asia. Simultaneously, it is in a mad scramble to catch up with China to secure access to those same vital minerals. Trump’s executive order on deep-sea mining underscores a shift in U.S. policy aimed at securing a stable supply of these valuable resources.
Chinese companies are already exploring alternative markets in Europe and Latin America as they face a slowdown in exports to America. Chinese manufacturers in response have been making rapid adjustments. Their goal is to mitigate the effects of the tariffs levied by the U.S. government.
The changing landscape of U.S. and China relations remains vital in developing new trade opportunities and fostering relationships between countries. Indian airlines are recalibrating to a changed operational environment. At the same time, international trade policies have significant impacts for all of us.