Air India said on Tuesday evening that it had so far not received any word from the Saudi authorities.
If approved, it would be the first time Saudi Arabia allows commercial flights to fly to Israel to use its airspace and would signal a significant shift in policy that has shaped the region for decades.
Speaking to reporters in Washington on Monday, Netanyahu said Air India had reached an agreement with Saudi Arabia to use their airspace. "We are in the process of launching direct flights to Tel Aviv. and have applied" for the permission, he said.
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Meanwhile in New Delhi, an Air India spokesperson reacting to Prime Minister Netanyahu's statement said, "We are yet to receive any communication from the Indian regulator".
The proposed plan was swiftly denied by The Saudi Arabia Aviation Authority who claimed to never have given such permission and that no deal was struck with India or Israel to approve the flight plan. "Air India signed an agreement today [Monday] to fly to Israel over Saudi Arabia", he was quoted as saying by The Times of Israel.
Saudi Arabia has granted Air India permission to use its airspace for its new routes to and from Tel Aviv.
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Saudi Arabia officially does not recognize the existence of Israel, and all planes flying from Israel to India and returning, are banned from flying through Saudi Arabian airspace.
The official said that since this may hurt El Al, which also flies directly to India, talks are underway with the El Al so that they do not get hurt economically.
The new Israel-India route was announced by Indian Prime Minister Narendra Modi during his visit to Israel in July. Last year, he became the first Indian premier to go to Israel on an official state visit.
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"The political changes in Saudi Arabia and the desire to consolidate power are the main reason why these relations with Israel were opened", Mahjoob Zweiri, an associate professor in the Gulf Studies Program at Qatar University, had previously said.