The Indian aviation industry is expected to post higher losses of ₹9,500–10,500 crore in FY26, compared to an estimated ₹5,500 crore in FY25, according to a report by ratings agency ICRA. The widening losses are being attributed to geopolitical tensions, trade headwinds, and slower passenger growth.
Despite the setback, ICRA noted that losses remain much lower than those recorded in FY22 (₹21,600 crore) and FY23 (₹17,900 crore), indicating gradual improvement in the sector.
Passenger Traffic Growth Slows
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Domestic air passenger traffic is projected at 172–176 million in FY26, a 4–6% rise year-on-year.
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This is below ICRA’s earlier projection of 7–10% growth.
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Passenger traffic in Q1 FY26 rose only 4.4% YoY, as cross-border escalations caused flight cancellations and disruptions.
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The prolonged monsoon season and US trade tariffs have further dampened travel sentiment.
Additionally, yields dropped by 4–5% YoY in Q1 FY26, showing weaker pricing power compared to FY25.
Impact of Air India Crash
The slowdown also reflects the impact of the June 12 Air India Boeing 787-8 crash in Ahmedabad, which killed 260 people on board and on the ground.
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Although June passenger numbers were unaffected due to advance bookings, July 2025 saw a 2.94% YoY decline in domestic passenger traffic.
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Air India alone lost nearly 4 lakh passengers, carrying 33.08 lakh flyers compared to 36.92 lakh in July 2024.
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The carrier’s domestic market share fell by nearly 1%.
Capacity Expansion & Deliveries
The industry has continued to expand capacity despite weaker demand:
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5% capacity addition in FY25, bringing the fleet size to 855 aircraft as of March 31, 2025.
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Airlines have pending orders of over 1,600 aircraft for the next decade, much of which will replace older planes with new, fuel-efficient models.
ICRA’s Outlook
Kinjal Shah, Senior VP & Co-Group Head at ICRA, said:
“During FY2025, the Indian aviation industry benefited from improved pricing power and strong demand. However, the demand environment has turned more cautious in FY2026. Losses are set to rise as passenger growth slows, even as aircraft deliveries increase.”
