Indian aviation industry to incur net losses up to Rs 105 billion in FY26: ICRA

New Delhi [India], October 28 (ANI): Indian aviation industry's net financial losses to increase to Rs 95-105 billion in FY2026, credit rating agency ICRA said in a release. The agency expects net losses to widen more than Rs 100 billion in FY2026, compared with Rs 55 billion in FY2025. The increase is attributed to slower traffic growth amid high aircraft deliveries and rising operational costs.
According to the release, a major cost driver continues to be aviation turbine fuel (ATF), which rose 3.3 per cent sequentially in October 2025. Fuel prices averaged Rs 95,181 per kilolitre in FY2025, lower than last year, but volatility persists due to exchange rate fluctuations. Fuel accounts for 30-40 per cent of airlines' operating costs, while a large share of expenses remains dollar-denominated, leaving airlines vulnerable to currency movements.
India's domestic air passenger traffic also declined in September 2025, as compared to the same period the previous year. The domestic air passenger traffic was estimated at 128.5 lakh in September 2025, down 1.4 per cent from 130.3 lakh in September 2024 and 0.8 per cent lower than 129.5 lakh in August 2025.
The fall comes despite airlines deploying slightly higher capacity compared to the previous month, though capacity remained 3.3 per cent lower year-on-year. The aviation sector continues to navigate a mix of operational and financial headwinds.
During the first half of FY2026 (April-September 2025), domestic passenger traffic touched 803.7 lakh, a 1.3 per cent increase over the same period last year. ICRA said this slow growth reflected "cautious travel sentiment" amid ongoing challenges in the industry.
At the same time, international air traffic for Indian carriers has shown stronger momentum. In August 2025, the segment recorded 29.9 lakh passengers, a 7.8 per cent year-on-year rise, supported by sustained recovery in global travel. For the five months from April to August 2025, Indian carriers flew 147.3 lakh international passengers, up 9.7 per cent over the previous year.
ICRA's outlook on the Indian aviation sector remains 'Stable', but it has revised its growth forecast for FY2026 to 4-6 per cent, lower than the earlier estimate of 7-10 per cent. The agency cited "cross-border escalations leading to flight disruptions, travel hesitancy following an aircraft accident, and trade tensions linked to US tariffs" as factors likely to weigh on demand.
The sector's capacity has also been hit by engine failures and supply chain issues, particularly involving Pratt & Whitney engines. While the number of grounded aircraft has fallen from last year's peak, around 133 planes--or 15-17 per cent of the total fleet--remained grounded as of March 2025. These constraints, coupled with pilot shortages and rising lease rates, have added to operational strain.
ICRA noted that while some carriers are supported by strong parent companies, others continue to face stretched liquidity. "Healthy yields and high passenger load factors are helping absorb some of the pressure," it added. (ANI)