Anticipated Rise in Domestic Air Travel Passengers: Predicted Figures Range from 172 to 176 Million for Fiscal Year 2026
The Indian aviation industry is bracing for a net loss of Rs 95-105 billion in the financial year 2026 (FY26), according to a report by ICRA, a leading rating agency. This forecast is a significant improvement compared to the losses reported in FY22 and FY23, which stood at Rs 216 billion and Rs 179 billion, respectively.
The demand environment for air travel has turned more cautious in FY26, as stated by ICRA. The growth in passenger traffic in Q1 FY26 was 4.4%, but was weighed down by cross-border escalations, aircraft accident tragedies, and travel hesitancy. Despite these challenges, the Indian aviation industry is projected to see a passenger traffic increase of 4-6% in FY26, reaching 172-176 million.
The industry benefited from improved pricing power in FY25, evident in higher yields, driven by healthy demand for air travel. However, yields (airline revenues per passenger mile) declined by 4-5% YoY in Q1 FY26 due to the factors mentioned above. A large part of the pending aircraft deliveries over the next 10 years is towards replacing old aircraft with new fuel-efficient ones.
In FY25, the aviation industry saw a 5% capacity addition, reaching 855 aircraft as of March 31, 2025. However, as of September 2023, 20-22% of the total industry fleet was grounded due to engine failures and supply chain challenges. As of March 2025, this proportion has come down to around 15-17%, corresponding to around 130 aircraft.
Major airlines like Emirates, American Airlines, and Ryanair announced large orders for new aircraft between September 2023 until March 2025. This trend is expected to continue, with various industry players announcing large aircraft purchase orders, with more than 1,600 aircraft deliveries pending over the next 10 years.
Kinjal Shah, Senior Vice President and Co-Group Head of ICRA, commented on the forecast, stating, "The Indian aviation industry is expected to report a net loss of Rs 95-105 billion in FY26, compared to an estimated Rs 55 billion in FY25."
The report was projected on Thursday, but the specific date for the article is not provided. It is worth noting that the net loss is due to the slowdown in passenger traffic growth amid a period of rising aircraft deliveries. Additionally, a prolonged period of monsoons in July-August 2025 and trade headwinds from US tariffs may further dampen air travel in the coming quarters.
Despite these challenges, the Indian aviation industry remains resilient, with promising growth prospects for the future. The industry is expected to recover and continue its upward trajectory in the coming years, driven by factors such as increasing passenger traffic, improved pricing power, and large-scale aircraft deliveries.
