Key Points

Credit rating agency ICRA gave a stable outlook for the sector, driven by expectations of a modest 4 to 6 per cent growth in domestic air passenger traffic in FY2026, the report said.

Analysts indicated that reduced ATF costs and strong yields will help airlines in managing short-term challenges, despite ongoing supply-chain and engine failure issues.

For August 2025, domestic air passenger traffic stood at 131.7 lakh against 131.3 lakh in August 2024, implying a 0.3 per cent YoY increase, the report said. On a sequential basis, domestic air passenger traffic in August 2025 was higher by 4.5 per cent.

For the five months of FY2026, domestic air passenger traffic was 677.5 lakh, reflecting a YoY growth of 2.2 per cent, the report noted.

In FY2025, domestic traffic reached approximately 1,653.8 lakh, marking a 7.6 per cent increase. Further, international passenger traffic for Indian carriers rose by 14.1 per cent to 338.6 lakh.

ICRA revised international passenger traffic growth expectations to 13-15 per cent for this fiscal, from an earlier 15-20 per cent, citing cross‑border tensions and travel hesitancy following the recent air accident tragedy. Aviation turbine fuel (ATF) prices in September 2025 were lower by around 1.4 per cent on a sequential basis.

Engine failures and supply-chain disruptions have grounded a significant portion of fleets, increasing costs through wet leases and maintenance.

In FY2025, the industry also faced challenges related to the availability of pilots and cabin crew, resulting in several flight cancellations and delays, the report noted.

However, healthy yields, high passenger load factors (PLF), and partial compensation from engine OEMs are helping absorb the impact to an extent, the report noted.

- IANS