India’s domestic air passenger traffic is projected to rise to 172–176 million in FY26, marking a growth of 4–6 per cent over the previous year, according to a report released on Thursday by rating agency ICRA.
The moderation in growth comes even as aircraft deliveries are increasing. In Q1 FY26, passenger traffic grew 4.4 per cent year-on-year, but was impacted by cross-border tensions that led to flight disruptions and cancellations, as well as travel hesitancy following an aircraft accident.
Yields declined by 4–5 per cent during the quarter. A prolonged monsoon is also believed to have affected air travel in July–August 2025, while trade headwinds from US tariffs are expected to weigh on business sentiment in the coming quarters.
“During FY25, the Indian aviation industry benefited from improved pricing power, visible in higher yields driven by robust demand. However, the demand environment has turned more cautious in FY26,” said Kinjal Shah, Senior Vice President and Co-Group Head, ICRA.
ICRA estimates the aviation industry will post a net loss of ₹95,000–₹105,000 crore in FY26, against an estimated ₹55,000 crore in FY25. The projected losses remain considerably lower than those recorded in FY22 (₹2.16 lakh crore) and FY23 (₹1.79 lakh crore).
The industry added about 5 per cent capacity in FY25, taking the fleet size to 855 aircraft as of March 31, 2025. Airlines have placed large purchase orders, with more than 1,600 aircraft scheduled for delivery over the next decade. A significant share of these will replace older aircraft with fuel-efficient models.
Operational challenges have also eased. Engine failures and supply chain issues had grounded 20–22 per cent of the fleet as of September 2023. This has reduced to around 15–17 per cent, or about 130 aircraft, by March 2025, Shah added.
-IANS