Despite the pilot's return, the path forward was uncertain for two countries that have faced off for years along the Kashmir boundary known as the Line of Control, in one of the world's most volatile regions.
What does the pilot say?
"The way situation is developing along the LoC makes me feel that both sides may collide head-on anytime now", said Chaudhry Jahangir, a Pakistani resident of the Samahni sector in Kashmir.
Wing Commander Abhinandan also criticised the Indian press, saying they always exaggerate and say a lot of damaging things that mislead people.
Pakistani and Indian flags fly in their respective countries. In retaliation, India withdrew Pakistan's most-favoured nation (MFN) status and raised customs duties on goods imported from Pakistan to 200 percent.
Asked about the damage caused by Indian warplanes in Tuesday's air strike, Kapoor said it was premature to provide details about casualties.
What led to this moment?
Varthaman was shot down over in Pakistan-administered Kashmir, which has seen rising tensions in recent weeks.
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In his missive Finance Minister Arun Jaitley said, "India's happiness on return of Wing Commander Abhinandan is unprecedented".
Speaking earlier on Thursday, Modi spoke in strong words against Pakistan, urging his nation to "stand like a wall" against an enemy he said "supports terror". On February 27, Pakistan's planes attacked military targets in Jammu and Kashmir.
The fight over Kashmir dates back to 1947 when Britain granted independence to the region. All but one were over Kashmir. Even though both countries control parts of Kashmir, each insists that the entire region is theirs.
The airspace closure disrupted not just Pakistan's air transport but flights worldwide as airlines were forced to cancel or reroute flights to other destinations that pass over Pakistan. On Thursday, Khan announced that the IAF pilot would be released as a "gesture of peace".
Khan has already called for talks with India to prevent the risk of a "miscalculation" between their militaries.
Indian media reports claimed that Pakistan had rejected Indian request for sending the arrested pilot to New Delhi by air.
Pakistan retaliated, shooting down two Indian aircraft on Wednesday and capturing the pilot. Our armed forces are an inspiration for 130 crore Indians.
"We are happy to have him back", the Air Force officer said at the border, without taking any questions. The pilot ejected himself and was taken prisoner by Pakistan.
Pakistan media praised the government for releasing the pilot.
The statement is yet another sign that tensions with India may be de-escalating.