The route over Saudi Arabia will cut down the flying time from some eight hours to about five and a half.
Now the only other airline to fly between the two countries is Israeli flag carrier El Al, which is forced to take an elongated route to avoid Saudi airspace.
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Air India said on Wednesday it planned to begin thrice-weekly non-stop flights from Delhi to Tel Aviv this month via Saudi airspace. By comparison, Air India's three flights a week between the Indian capital and Tel Aviv - a longer flight by distance - will take only seven hours.
The letter to the ICAO adds that this situation, "clearly violates the basic principle of reciprocity and equality as recognized in the global civil aviation industry" and "violates the provision of the Convention on worldwide Civil Aviation".
"Air India will gain a significant and unfair advantage over El Al with respect to flights between Israel and India", CEO Gonen Usishkin said in the letter.
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Flying over Saudi Arabia significantly shortens the route's flight time.
While Israel and Saudi Arabia do not have formal relations, in recent years there have been numerous reports of more clandestine relations between the two Middle Eastern powers, especially as both countries see Iran as the primary threat in the region.
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Saudi Arabia's civil aviation authority did not respond to AFP's request for comment.