India’s aviation sector is expected to post a net loss of Rs 20–30 billion in FY2025-26 (FY26), according to credit rating agency ICRA. The projected loss is in line with the estimated losses for FY2024-25 (FY25), reflecting ongoing challenges around fuel costs, fare pricing, and high lease-related expenses.
In its report, ICRA highlighted that despite strong demand for air travel, airlines are struggling to raise ticket prices due to intense competition and high price sensitivity in the domestic market. This, coupled with elevated aviation turbine fuel (ATF) prices, is expected to weigh on airline yields and profitability.
Adding to the pressure, interest costs are projected to rise in FY26 as airlines continue expanding their fleets through leased aircraft. The resulting increase in lease liabilities is likely to push up financing costs, further compressing profit margins.
However, the projected losses for FY26 are significantly lower than the pandemic-era setbacks. The sector reported net losses of Rs 235 billion in FY2021-22 and Rs 174 billion in FY2022-23, mainly due to COVID-19 disruptions and volatile fuel prices.
ICRA noted a gradual improvement in financial stability. The industry’s interest coverage ratio is expected to range between 1.5 and 2.0 times in FY26, indicating moderate resilience in debt servicing capacity despite persistent bottom-line stress.
Passenger traffic figures reflect the underlying demand strength. For June 2025, domestic air passenger traffic was estimated at 138.7 lakh, marking a 5.1% year-on-year rise but a marginal 1.3% drop from May 2025. Capacity deployment in June was 4.9% higher compared to June 2024 but 2.3% lower sequentially.
In Q1 FY26 (April–June 2025), domestic traffic stood at 422.4 lakh, up 5.1% year-on-year. International traffic for May 2025 reached 29.7 lakh, up 7.3% YoY, though down 7.9% from April due to geopolitical concerns. For April–May (2M FY26), international traffic rose 12.1% YoY to 59.8 lakh.
For the full financial year FY25, domestic passenger traffic was about 1,653.8 lakh, registering a 7.6% growth. International passenger traffic for Indian carriers stood at 338.6 lakh, up 14.1% from the previous year
