Services sectors feel ripple effects as West Asia crisis hits operations

Aviation, hospitality, travel, e-comm, q-com, logistics prepare for dent to bottomlines; IT services insulated for now

India’s services sector has started to feel the heat two weeks into the West Asia crisis. Business operation hold-ups have started to trickle down to customers as well. Airlines facing higher aviation turbine fuel (ATF) costs are passing them on to flyers, making for expensive travel. While, hospitality, travel and e-commerce are dealing with LPG shortages and rising food costs. As restaurants scramble for alternative cooking resources to meet customer demand, logistics firms are facing workforce shortages.  Here is a breakdown of the cost of war on the services sector. 

Aviation 

All Indian carriers have had to cancel a significant portion of their international services since February 28 when the conflict began, which is set to eat into their bottom lines, since international services are typically more lucrative, given they contribute a larger share of revenue and profits. Flight operations to Europe — which were being routed via West Asia due to the closure of Pakistan’s airspace after Operation Sindoor —  have also been impacted. “Some flights between India and Europe are even flying south towards Africa before turning north to reach Europe,” said an industry executive. 

The wave of cancellations and rescheduling, coupled with a sharp rise in ATF prices, has significantly pushed up operational expenses for major Indian carriers. ATF prices rose to $225.5 per barrel on March 4, about 167 per cent higher than the average. 

Carriers have since raised fuel surcharges. Air India levied ₹399 on all domestic flights and $10 on international flights to Saarc countries, West Asia and Singapore, starting March 12. IndiGo levied ₹425 on domestic and Indian subcontinent flights, ₹900 for Middle East flights, ₹1,800 for Southeast Asia, West Asia, China and Africa, and ₹2,300 for Europe. Akasa Air levied ₹199 to ₹1,300 per sector depending on flight duration. 

Travel 

Travel companies and tour service providers are expecting overall travel costs to rise by 20-30 per cent in the near term.

“The cost of international flights, which is usually a chunk of the travel cost, will go up and this will in turn end up raising customer spends in the coming weeks and months,” said a senior industry executive at a travel aggregator who did not want to be named.   

“If the war keeps continuing, travel of international delegates coming to events in India may be pushed ahead. It might get more expensive to travel internationally in the upcoming summer holiday season, especially to the Western parts of the world, so there could be an opportunity for more demand from domestic tourism destinations,” said Satyen Jain, chief executive officer of Pride Hotels group. 

“We are already seeing searches go up for domestic destinations like Goa and Pondicherry and cooler places like Ooty, Kasauli, and Manali etc. The travel landscape has evolved significantly since Covid and people are stepping out more, even if they travel only domestically,” said an industry executive who did not wish to be named. 

Hotels and restaurants 

For the hospitality sector, the past two weeks have been about ensuring LPG supplies to kitchens of hotels and restaurants, with moves to shift to alternatives such as induction cooktops and going back to tandoors and open kitchens using firewood — especially for large scale cooking like banquets and marriages. 

Several restaurants and eateries in Bengaluru, Mumbai and Kolkata shut shop in non-peak hours, while others reported LPG shortages, panic buying and price spikes. 

Business Standard reported last week that restaurants were set to raise their prices by 20-30%, earlier than the typical cycle that takes place in July. 

Zorawar Kalra, founder of Massive Restaurants that operates brands like Farzi Cafe and Pa Pa Ya, among others, said 60 per cent of the operations depend on LPG and three of the chain’s outlets in Mumbai and Bengaluru were affected. Almost 70 per cent of India’s ₹6.6 trillion food and beverages sector depends on LPG, he said. 

The National Restaurant Association of India (NRAI) issued an advisory to its members on ways to reduce fuel usage, including curtailing menus. “We’ve optimised the selections a little bit in order to conserve LPG, like not doing lavish buffets and doing more a-la-carte, so there’s no wastage,” Pride Hotels’ Jain added. 

Quick commerce 

On quick commerce (qcom) platforms such as Swiggy Instamart, Blinkit and Zepto, many products in the electric cooking appliances category —  induction cooktops, electric kettles and air fryers — are currently either out of stock, or available in limited quantities, as demand surged amid curtailed LPG supply. 

Instant food delivery businesses and cloud-kitchens are facing multiple pressures on operations. “Vendor-side margin compression, potential menu repricing, reduced order frequency from cost-conscious middle-income households, and the fertiliser sector now running at 70 per cent gas capacity, which means food input costs will follow. The platforms that are not renegotiating vendor terms or diversifying to induction-based dark stores right now are building risk,” said Madhav Kasturia, founder and chief executive officer (CEO) of logistics platform Zippee. 

The country’s cloud kitchen market, valued at $1.2 billion in 2025, runs almost entirely on LPG, he added. 

Retailers Association of India (RAI) chief executive, Kumar Rajagopalan, said that prolonged shortages could force temporary closures and disrupt food supply to hospitals, workplaces and institutions. Companies are already seeing pressure in segments such as cooked food, groceries and packaged food products. Some executives said prices for certain food items could rise by as much as 25-30 per cent if the conflict continues for the next few weeks. 

A prolonged conflict could also affect consumer spending patterns, another executive said. “If prices continue rising, consumers are likely to cut back on discretionary purchases,” the executive said. 

Logistics 

Logistics across companies is getting impacted by workforce shortage, as daily life of many migrant workers who support warehouse operations has been upended due to LPG shortage, used for daily cooking. 

“With supply constraints and a recent festival like Holi, some workers have delayed returning to cities, leading to manpower shortages at fulfilment centres and logistics facilities. The impact is also being felt in intra-city transportation, particularly in last-mile delivery,” said Ajay Rao, founder and CEO of supply chain and logistics company Emiza. “To maintain operational continuity, logistics companies are focusing on workforce stability by offering incentives such as attendance bonuses and overtime pay,” he added. 

IT services 

India's $300 billion IT services industry remains insulated from a direct blow from the West Asia crisis for now. However, secondary effects are already being felt. Several companies have asked their executives to limit travel amid restrictions in the region. Indian IT companies have beefed up their presence in West Asia in recent years, as countries in the region try to reduce their dependency on oil revenue and look to other sectors to boost growth. That means massive digital transformation and new opportunities in the region even as growth in the primary markets remain sluggish. 

On the business side, analysts warn that the uncertainty could delay decision-making among clients in the region and in other markets, pushing back deal closures and project timelines. 

There is, however, one financial silver lining — the depreciating rupee. As the crisis rattles currency markets, the rupee's slide against the dollar works in Indian IT's favour. Every one per cent depreciation in the rupee expands operating margins by 20 to 40 basis points, offering some cushion against the broader uncertainty.

 

Under pressure  Aviation

• International flight cancellations and longer routes have increased operational costs for airlines

Travel

• International travel costs may rise by 20–30%, which could shift demand towards domestic tourism destinations

Hotels & restaurants

• LPG shortages are disrupting kitchen operations, forcing restaurants to reduce hours

Quick commerce

• Demand for electric cooking appliances like induction cooktops and kettles has surged, causing stock shortages on quick-commerce platforms

Retail / Consumer spending

• Rising food costs could push food prices up by 25–30%, potentially reducing discretionary consumer spending

Logistics

• Daily life of many migrant workers who support warehouse operations has been upended due to LPG shortage

IT services

• The sector remains largely insulated, though deal decisions in the West Asia may slow due to uncertainty