Indian aviation industry may post higher losses at Rs 9,500-10,500 cr this fiscal: ICRA

Mumbai: The Indian aviation industry may post higher losses at Rs 9,500-10,500 crore this fiscal from an estimated Rs 5,500 crore in FY25, owing largely to the ongoing geopolitical situation and trade headwinds, ratings agency ICRA said on Thursday.

At the same time, ICRA said, it is expecting a modest increase in domestic air passenger traffic to 172-176 million in FY2026, reflecting a growth of 4-6 per cent over the previous year, lower than its earlier projections of a 7-10 per cent increase.

The estimated losses for the current fiscal, however, remain significantly lower than those reported in FY2022 and FY2023 at Rs 21,600 crore and Rs 17,900 crore, respectively, the ratings agency said.

"ICRA forecasts a modest increase in domestic air passenger traffic to 172-176 million in FY2026, reflecting a growth of 4-6 per cent over the previous year, lower than its earlier projections of a 7-10 per cent increase. This slowdown in passenger traffic growth at a time when aircraft deliveries are rising, is estimated to widen the net loss of the Indian aviation industry to Rs 95-105 billion (Rs 9,500-10,500 crore) in FY2026 from Rs 55 billion (Rs 5,500 crore) in FY2025," ICRA said.

Passenger traffic growth in the first quarter of FY26 was 4.4 per cent year-on-year, weighed down by cross-border escalations that had led to flight disruptions and cancellations, as well as travel hesitancy post the aircraft accident tragedy, ICRA said.

Accordingly, the yields declined by 4-5 per cent year-on-year in Q1 FY2026, it said, adding that a prolonged period of monsoons is likely to have affected air travel in July-August 2025, and now trade headwinds emanating from US tariffs are set to dampen business sentiments in the coming quarters, bringing more circumspection to travel.

It may be mentioned here that on June 12 Tata Group-run Air India Boeing 787-8 aircraft crashed within a minute of taking off from Ahmedabad and ploughed into a medical college hostel, killing 260 people onboard and on ground.

While the impact of the crash did not show in the June month domestic passenger numbers on a sequential basis on account of the advanced booking, it became visible in July passengers volumes when domestic passenger traffic declined 2.94 per cent year on-year with Air India losing nearly 1 per cent market share.

Air India lost nearly 4 lakh passengers in July, at 33.08 lakh, as against 36.92 lakh passengers that it flew on domestic routes a year earlier.

"During FY2025, the Indian aviation industry benefited from improved pricing power, evident in higher yields, driven by healthy demand for air travel. However, the demand environment has turned more cautious in FY2026," said Kinjal Shah, Senior Vice President & Co-Group Head, ICRA.

Losses are set to shoot up principally because passenger traffic growth will be slowing down amid a period of rising aircraft deliveries, she added.

The industry saw around 5 per cent capacity addition in FY2025 to reach 855 aircraft as on March 31, 2025. Various industry players have announced large aircraft purchase orders, and as per the indicative numbers, the total pending aircraft deliveries are more than 1,600, which are likely to be received over the next 10 years.

A reasonably large part of these is towards the replacement of old aircraft with new fuel-efficient ones, ICRA said.