Domestic air traffic growth will be at 0-3% in FY26, down from earlier projection of 4-6% amid disruptions: ICRA

New Delhi [India], December 30 (ANI): India's domestic air passenger traffic is expected to grow at a slower pace of 0-3 per cent in FY2026, sharply lower than the earlier projection of 4-6 per cent, due to multiple disruptions during the year, according to a report by ICRA.
The rating agency said the downward revision reflects a combination of operational, geopolitical and sentiment-related factors that impacted air travel demand. As per the report, domestic air passenger traffic growth during the first eight months of FY2026 (April-November 2025) stood at 2.2 per cent year-on-year, which was lower than earlier expectations.
It stated, "Domestic air passenger traffic growth to 0-3 per cent in FY2026 against its earlier projection of 4-6 per cent. The aircraft accident tragedy in June 2025 that made travellers hesitant at least during the period immediately post the accident."
ICRA noted that one of the key reasons for the slower growth was cross-border escalations, which led to flight disruptions and cancellations earlier in the year. These developments affected travel plans and resulted in subdued passenger movement during certain periods.
Another major factor highlighted in the report was the aircraft accident tragedy in June 2025. The incident made travellers hesitant, particularly in the period immediately following the accident, leading to a temporary dip in travel sentiment. The report stated that such events tend to impact passenger confidence, even if only for a short duration.
In addition, headwinds from US tariffs weighed on business travel, further affecting overall passenger traffic. According to ICRA, the impact on corporate travel demand added to the pressure on domestic air traffic growth during FY2026.
The report also pointed to operational disruptions at IndiGo between December 3 and December 8, 2025, which resulted in around 4,500 flight cancellations. While these cancellations accounted for only about 0.4 per cent of the total annual industry departures, ICRA expects travel sentiment to remain somewhat dampened in the immediate aftermath of the IndiGo episode.
Despite these challenges, ICRA has maintained a Stable outlook for the domestic aviation industry. The agency said the disruptions are expected to be temporary in nature. It has kept its domestic air passenger traffic growth forecast for FY2027 unchanged at 6-8 per cent.
However, ICRA noted that the lower base in FY2026 would lead to lower domestic passenger volumes in FY2027 than previously projected. As per the revised estimates, domestic air passenger traffic is now expected to be in the range of 175-182 million in FY2027, compared to the earlier projection of 179-186 million.
On the international front, ICRA has also revised its outlook. The growth forecast for international air passenger traffic for Indian carriers in FY2026 has been cut to 7-9 per cent, from the earlier estimate of 13-15 per cent.
Overall, the report said that while near-term growth has been impacted by multiple disruptions, the medium-term outlook remains stable as the industry is expected to recover once these temporary factors ease. (ANI)