**India’s Aviation Sector Faces Projected Losses in FY26 Amid Rising Costs**
India’s aviation industry is anticipated to incur a net loss ranging from ₹20 billion to ₹30 billion in the financial year 2025-26 (FY26), aligning closely with the estimated losses for FY2024-25 (FY25), as reported by the credit rating agency ICRA. This forecast indicates a continuation of financial challenges following a net profit of approximately ₹16 billion in FY2024, primarily due to ongoing pressure on yields as airlines work to maintain sufficient passenger load factors (PLF) amidst elevated aviation turbine fuel (ATF) prices.
Despite robust demand for air travel, airlines are unlikely to implement significant ticket price increases due to competitive market dynamics and price sensitivity among consumers. The combination of high fuel costs and competitive pricing is expected to further strain profitability. Additionally, the financial burden is set to increase in FY26 as interest costs rise due to growing lease liabilities, with several airlines scheduled to receive new aircraft deliveries. This heightened debt load is projected to elevate financing costs, thereby compressing profit margins.
However, the anticipated losses for FY26 represent a notable improvement compared to the substantial setbacks experienced in previous years. The industry recorded staggering net losses of ₹235 billion in FY22 and ₹174 billion in FY23, largely attributed to disruptions caused by the COVID-19 pandemic and fluctuations in fuel prices. Encouragingly, the sector’s financial resilience is gradually improving, with the interest coverage ratio—an essential measure of the industry’s ability to service its debt—expected to range between 1.5 and 2.0 times in FY26. This suggests a relatively stable capacity for debt servicing, even in the face of bottom-line pressures.
In terms of passenger traffic, domestic air travel is projected to reach approximately 138.7 lakh in June 2025, reflecting a 5.1% increase from 132.1 lakh in June 2024, although it shows a slight sequential decline of 1.3%. Airlines’ capacity deployment for June 2025 is estimated to be 4.9% higher than the previous year, yet it is 2.3% lower compared to May 2025. For the first quarter of FY2026 (April-June 2025), domestic air passenger traffic is expected to total 422.4 lakh, marking a year-on-year growth of 5.1%.
International passenger traffic for Indian carriers in May 2025 is projected at 29.7 lakh, reflecting a year-on-year growth of 7.3%, although it shows a sequential decline of 7.9% due to geopolitical challenges. For the first two months of FY2026, international passenger traffic is estimated at 59.8 lakh, indicating a year-on-year growth of 12.1%. In FY2025 (April 2024-March 2025), domestic air passenger traffic is expected to reach around 1,653.8 lakh, with a year-on-year growth of 7.6%, while international passenger traffic for Indian carriers is projected at 338.6 lakh, reflecting a year-on-year growth of 14.1%.
In conclusion, while the Indian aviation sector faces significant challenges in FY26, including rising costs and competitive pressures, the projected losses indicate a recovery trajectory compared to the previous years’ substantial setbacks. The industry’s ability to adapt to these challenges will be crucial for its future stability and growth.
**FAQ**
**What are the projected losses for India’s aviation industry in FY26?**
The aviation industry in India is projected to incur net losses between ₹20 billion and ₹30 billion in FY26, continuing the trend of financial challenges faced in previous years.
