Indian Aviation Losses to Shrink by One-Third to Rs 110-120 Billion by FY27

The industry's net loss is projected to reduce to Rs 110-120 billion in 2026-27 from an elevated Rs 170-180 billion in the current 2025-26 fiscal year. While the 2025-26 losses are significantly higher than the Rs 55 billion loss reported in 2024-25, the anticipated improvement is driven by the normalisation of flight operations and a steady rise in passenger demand.

According to rating agency ICRA, domestic air passenger traffic is expected to touch between 175 million and 179 million during this period. This recovery follows a period of modest growth in 2025-26, where estimates were revised downward to 0-3 per cent due to several external disruptions.

Kinjal Shah, Senior Vice President & Co-Group Head at ICRA, stated, "ICRA has maintained a Stable outlook for the Indian aviation industry, supported by expectations of modest growth in domestic air passenger traffic and a gradually improving operating environment, despite near-term challenges. The Indian aviation industry is expected to report a net loss of Rs 170-180 billion in 2025-26, significantly higher than the estimated net loss of around Rs 55 billion in 2024-25. However, the same is likely to reduce to Rs 110-120 billion in 2026-27, led by growth in domestic air passenger traffic and expected normalisation of operations post disruptions seen in 2025-26 that had resulted in flight cancellations and passenger refunds. The industry's debt metric, which weakened in 2025-26 with an estimated interest cover of 0.7-0.9 times from 1.8 times in 2024-25, is also expected to improve to 1.3-1.5 times in 2026-27, despite increasing debt linked with new aircraft deliveries."

The current fiscal year faced headwinds from cross-border escalations, weather disruptions, and travel hesitancy following an aircraft accident in June 2025. Additionally, business travel was impacted by elevated US tariffs and operational disruptions at IndiGo in December 2025. Despite these challenges, international air passenger traffic for Indian carriers remains relatively stronger, with growth estimated at 7-9 per cent for 2025-26 and 8-10 per cent for 2026-27.

Regarding fleet health, Shah added, "Engine failures and supply chain challenges had resulted in the grounding of 20-22% of the total industry fleet as of September 2023. The same has come down to 13-15% as of February 2026, corresponding to 117 aircraft".

As grounded aircraft numbers reduce and fresh supply enters the market, the industry expects a more stable equilibrium between supply and demand. As of December 31, 2025, the total industry fleet stood at 865 aircraft, with more than 1,700 aircraft pending delivery over the next decade.

"Airlines have experienced a reprieve on the Aviation turbine fuel (ATF) prices front so far this year with average ATF prices of Rs 91,173/KL in 11M 2025-26 (April 1, 2025, to February 1, 2026), 4% lower on a YoY basis, although higher than Rs 64,715/KL prevailed during the pre-Covid period (i.e. 2019-20). Meanwhile, the INR depreciated against the USD by around 3.2% on a YoY basis in 9M 2025-26," ICRA said. Although the domestic airlines have a partial natural hedge to the extent of earnings from their international operations, overall, they have net payables in foreign currency.

- ANI