Aviation industry net loss around Rs 170-180 bn in FY26: ICRA

The Indian aviation industry is expected to report a net loss of Rs 170-180 billion in 2025-26, significantly higher than the estimated net loss of around Rs. 55 billion in 2024-25, according to rating agency ICRA estimates.  

However, the same is likely to reduce to Rs 110-120 billion in 2026-27, led by growth in domestic air passenger traffic and expected normalisation of operations post disruptions seen in 2025-26 that had resulted in flight cancellations and passenger refunds.

The current fiscal year has seen a period of modest domestic air passenger traffic growth due to cross‑border escalations, weather‑related disruptions, travel hesitancy following the June 2025 aircraft accident, the impact on business travel owing to the headwinds stemming from elevated US tariffs and operational disruptions at IndiGo in December 2025.

Domestic air passenger traffic to grow by 6-8% and touch 175-179 million passengers in 2026-27. In December 2025, it had revised the domestic air passenger growth estimates to 0-3% for 2025-26 from 4-6% envisaged earlier.

The international air passenger traffic growth for Indian carriers is expected to remain relatively stronger, aided by low base effect, expanding e‑visa/visa‑on‑arrival coverage, and the Government of India’s focus on developing theme‑based and iconic tourist destinations.

ICRA estimates international air passenger traffic growth at 7-9% for 2025-26 and 8-10% for 2026-27. Moreover, ICRA projects the net loss of the Indian aviation industry to reduce to Rs. 110-120 billion in 2026-27 from an elevated Rs. 170-180 billion in 2025-26.

Kinjal Shah, Senior Vice President & Co-Group Head, ICRA, said: “ICRA has maintained a Stable outlook for the Indian aviation industry, supported by expectations of modest growth in domestic air passenger traffic and a gradually improving operating environment, despite near‑term challenges.”

The industry’s debt metric, which weakened in 2025-26 with an estimated interest cover of 0.7-0.9 times from 1.8 times in 2024-25, is also expected to improve to 1.3-1.5 times in 2026-27, despite increasing debt linked with new aircraft deliveries.”

Aviation turbine fuel (ATF) prices and the rupee-dollar movement have a significant bearing on the airlines’ profitability. Fuel costs account for 30-40% of the airlines’ operating expenses.

Meanwhile, the INR depreciated against the dollar by around 3.2% on a YoY basis in 9M 2025-26. While currency depreciation of the said extent may not be materially disruptive in isolation, it adds pressure to the cost structure of a loss-making industry where key expenses like aircraft lease payments, aircraft and engine maintenance costs, and debt servicing are highly sensitive to currency movements.

The yields of the industry have declined in 9M 2025-26 on a YoY basis due to a series of external events like cross-border escalations, airplane crash and operational disruptions at IndiGo in the first week of December 2025.

The industry saw around 4% capacity addition in CY2025, and the total number of aircraft stood at 865 as of December 31, 2025. 

Various industry players have announced large aircraft purchase orders, and as per the indicative numbers, the total pending aircraft deliveries stand at more than 1,700 as of January 31, 2026, which are likely to be received over the next 10 years. A large part of these orders is towards the replacement of old aircraft with new fuel-efficient ones.