NewKerala.com

ICRA's Stable Outlook: Why India's Aviation Growth Faces Headwinds

ICRA has maintained a stable outlook for India's aviation sector despite several challenges. The rating agency projects modest 4-6% growth in domestic passenger traffic for the current financial year. Multiple factors including geopolitical tensions and the AI171 tragedy have contributed to travel hesitancy among passengers. While international traffic shows stronger growth potential, the industry continues to face financial pressures with projected net losses increasing this year.

Key Points: ICRA Affirms Stable Outlook for Indian Aviation Industry Growth

  • Domestic air traffic grew only 1.6% year-on-year during April-October 2025
  • Cross-border tensions and AI171 tragedy dampened passenger growth significantly
  • International traffic projected to grow stronger at 13-15% in FY2025-26
  • Industry faces net losses of Rs 95-105 billion amid rising aircraft deliveries
3 min read

ICRA affirms stable outlook on Indian aviation industry, though with challenges

ICRA maintains stable outlook for Indian aviation with 4-6% domestic growth projected for FY26, despite challenges from geopolitical tensions and AI171 tragedy.

"The yield movement will remain monitorable due to its linkage with aviation turbine fuel prices and the INR to USD exchange rate - ICRA"

New Delhi, November 18

Rating agency ICRA has affirmed "stable" outlook on Indian civil aviation industry, with expectations that will witness modest 4-6 per cent growth in domestic air passenger traffic in the current financial year 2025-26.

For April-October 2025, domestic air passenger traffic remained at 944.5 lakh, reflecting a year-on-year growth of 1.6 per cent, ICRA said.

The growth in the Indian aviation industry this fiscal could have been higher but for events like cross-border escalations (that had led to flight disruptions and cancellations earlier during the year) and the unfortunate AI171 tragedy in June 2025 that increased travel hesitancy, at least in the period immediately post the accident.

These factors, coupled with trade headwinds stemming from US tariffs, are set to dampen business sentiments in the coming quarters, bringing more circumspection to travel, the rating agency noted, while affirming "stable" sectoral outlook.

Likewise, the Air Traffic Control (ATC)-related disruptions seen in November 2025, leading to flight cancellations, would be an additional (although milder) growth dampener, ICRA has asserted.

As for international air passenger traffic growth for Indian carriers, ICRA projects this be in the range of 13-15 per cent in 2025-26.

"The yield movement will remain monitorable due to its linkage with aviation turbine fuel (ATF) prices and the INR to USD exchange rate, both of which have a significant bearing on airlines' cost structures," ICRA said in a statement.

The average ATF prices stood at Rs 95,181/KL) in 2024-25, 8.0 per cent lower on a year-on-year basis, ICRA said. Furthermore, ATF prices from April 1, 2025, to November 1, 2025, have decreased by 6.5 per cent year-over-year.

Fuel costs account for 30-40 per cent of airlines' operating expenses, including aircraft lease payments.

ICRA expects the Indian aviation industry to report a net loss of Rs 95-105 billion in 2025-26, compared to an estimated net loss of around Rs 55 billion in 2024-25.

"Losses are set to increase principally due to a slowdown in passenger traffic growth amid a period of rising aircraft deliveries. Nonetheless, the expected losses are significantly lower than Rs 216 billion and Rs 179 billion reported in 2021-22 and 2022-23, respectively," ICRA said.

A select few airlines face financial challenges and liquidity issues.

"While some airlines have adequate liquidity and/or financial assistance from strong parent companies, supporting their credit profiles, the credit metrics and liquidity profiles of others continue to remain under pressure, despite some improvement in recent years," ICRA noted.

- ANI

Share this article:

Reader Comments

R
Rohit P
The cross-border issues mentioned here are concerning for regular travelers like me. Had to cancel my Srinagar trip twice this year due to flight disruptions. Hope government and airlines work together to minimize such impacts.
A
Arjun K
While the outlook is stable, the projected losses of Rs 95-105 billion are worrying. Airlines need to focus more on operational efficiency rather than just expansion. The constant ATC disruptions at major airports need urgent attention too.
S
Sarah B
The decrease in ATF prices is positive news! As someone who travels frequently between Delhi and Bangalore for work, I've noticed ticket prices becoming slightly more reasonable. Hope this trend continues. ✈️
V
Vikram M
International traffic growth of 13-15% is impressive! Shows that despite challenges, Indian carriers are expanding their global footprint. The Middle East routes especially have seen good growth from what I've observed.
K
Kavya N
I appreciate ICRA's balanced assessment. The industry has come a long way from the pandemic losses, but there's still work to be done. The focus should be on sustainable growth rather than rapid expansion at all costs.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50