Domestic air travel to grow 7-10 per cent in FY2026, but aviation sector will remain in losses: ICRA

ANI June 20, 2025 288 views

India’s domestic air travel is set to grow 7-10% in FY2026, reaching up to 181 million passengers. Despite strong demand, the aviation sector will remain in losses, estimated at ₹20,000-30,000 crore due to rising fuel costs and lease expenses. International travel is also expected to surge by 15-20%, outpacing domestic growth. ICRA warns that financial recovery will be slow as airlines balance high operational costs with competitive pricing.

"The Indian aviation industry to report a net loss of Rs. 20-30 billion in FY2026." – ICRA Report
New Delhi, June 20: The Indian aviation industry is expected to continue growing, with domestic air passenger traffic expected to grow by 7-10 per cent year-on-year (YoY) in FY2026, reaching 175-181 million passengers, according to ICRA report.

Key Points

1

Domestic air traffic to hit 175-181 million in FY2026

2

Industry losses persist despite post-Covid rebound

3

Jet fuel costs and aircraft leases strain finances

4

International travel to grow 15-20% in FY2026

This follows a 7.6 per cent YoY increase in FY2025, when the total domestic traffic stood at 165.4 million passengers. Notably, this figure is 16.8 per cent higher than pre-Covid levels in FY2020, indicating a strong rebound in air travel demand.

Despite the increase in passenger numbers, ICRA expects the Indian aviation industry to report a net loss of ₹20,000-₹30,000 crore in FY2026.

ICRA stated in it's report, "The Indian aviation industry to report a net loss of Rs. 20-30 billion in FY2026." This projected loss is similar to the estimated losses in FY2025, and a stark contrast to the ₹1,600 crore net profit reported in FY2024.

The report attributes this ongoing loss to rising costs, high jet fuel prices, and mounting lease liabilities associated with new aircraft deliveries.

The industry's interest coverage ratio--a key financial metric-- is projected to be between 1.5 and 2.0 times in FY2026, suggesting some improvement in financial stability despite ongoing challenges.

International travel by Indian carriers is also expected to see robust growth. ICRA forecasts a 15-20 per cent rise in international passenger traffic in FY2026.

In FY2025, Indian airlines carried 33.86 million international passengers, a 14.1 per cent increase from the previous year and 49 per cent higher than pre-Covid levels in FY2020.

In terms of recent monthly trends, domestic passenger traffic in May 2025 was estimated at 14.36 million, a 4.1 per cent increase from 13.80 million in May 2024, although it remained largely flat compared to April 2025.

Airlines also deployed 5.1 per cent more capacity in May 2025 compared to the same month last year.While air travel in India continues to recover and expand, ICRA warns that the pace of financial recovery will be slow due to the high fixed costs in aviation, elevated aviation turbine fuel (ATF) prices, and higher interest burdens from aircraft leasing.

Airlines are expected to face pressure on yields as they strive to maintain high passenger load factors (PLFs), even as operational costs remain high.

Reader Comments

R
Rahul K.
More people flying is good for economy but why are airlines bleeding money? Government should reduce ATF taxes - fuel prices are killing this sector. Middle class is finally traveling more but airlines can't sustain losses forever. 🛫
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Priya M.
The aviation growth shows India's rising aspirations! But ₹30,000 crore loss is shocking. Airlines need better management - why can't they make profits when trains are always full too? Maybe too many discount tickets are being sold.
A
Amit S.
International travel growing faster than domestic is interesting. Indians are exploring the world more! But our airlines should focus on service quality too - recently flew to Dubai and foreign airlines still feel more premium. Make in India should mean best in India.
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Sunita R.
As frequent flyer, I see both sides. Ticket prices have gone up but service has gone down. Airlines are squeezing passengers with extra charges while cutting corners. Maybe losses would reduce if they stopped treating customers like ATMs! 😤
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Vikram J.
The aviation sector needs long-term solutions. High fuel costs + leasing charges are structural issues. Government should help by building more airports and improving air traffic management to reduce operational costs. UDAN scheme is good but needs expansion.
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Neha P.
Positive growth but worrying losses. Maybe airlines should focus on premium routes instead of competing on every sector. Also, why no mention of sustainability? With so many flights, carbon emissions must be addressed too. Growth should be responsible.

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Indian aviation ICRA report air travel growth domestic airlines aviation losses FY2026 forecast