(Reuters) -Air India said on Monday it would stop services between the capital cities of India and the U.S. from September 1, citing aircraft shortage due to the planned upgrades to its ageing Boeing ( BA ) planes and the closure of Pakistan's airspace.

The suspension of services between New Delhi and Washington, D.C., marks the latest setback for Air India, which is facing heightened regulatory scrutiny after a June crash in Ahmedabad killed 260 people.

The planned shortfall in Air India's fleet and continued closure of airspace over Pakistan have impacted the airline's long-haul operations, leading to longer flight routings and increased operational complexity, the carrier said.

The airline has undertaken a $400 million retrofit programme to upgrade its fleet.

It, however, sees the Pakistan airspace ban costing it $600 million over 12 months, Reuters had earlier reported.

India and Pakistan closed their respective airspaces to each other days after relations between the arch-rivals nosedived following a fatal attack on civilians in Indian Kashmir, which also sparked the worst fighting between the neighbours in decades.

New Delhi has blamed Islamabad for the attack, accusations which Islamabad has denied.

Air India said its flyers will have options to choose flights to Washington, D.C., with layovers at New York, Newark, Chicago and San Francisco with the airline's interline partners Alaska Airlines, United Airlines and Delta Air Lines ( DAL ).

(Reporting by Hritam Mukherjee in Bengaluru; Editing by Anil D'Silva)