Get latest articles and stories on Business at LatestLY. The widening losses come against the backdrop of slowing passenger traffic growth and rising aircraft deliveries.
New Delhi [India], August 28 (ANI): The Indian aviation sector is set to face deeper turbulence in FY2026 as net losses are projected to rise to Rs 95,000-1,05,000 crore, up from Rs 55,000 crore in FY2025, according to credit rating agency ICRA.
The widening losses come against the backdrop of slowing passenger traffic growth and rising aircraft deliveries.ICRA has revised its growth forecast for domestic air passenger traffic for FY2026 to 4-6 per cent, lowering it from the earlier projection of 7-10 per cent. The agency now expects domestic traffic to reach 172-176 million passengers annually.”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,” noted Kinjal Shah, Senior Vice President & Co-Group Head, ICRA.Passenger traffic growth in the first quarter of FY2026 stood at 4.4 per cent year-on-year, dragged down by cross-border escalations, flight disruptions and a travel slowdown following an aircraft accident tragedy. Prolonged monsoons in July and August, as well as trade headwinds from US tariffs, are expected to further dampen business travel sentiment in the coming months.The decline in demand has led to a 4-5% year-on-year decrease in yields in Q1 FY2026. With additional aircraft deliveries underway, capacity growth amid subdued demand is likely to intensify pricing pressure, pushing up industry losses.ICRA highlighted that the sector’s debt metrics will weaken in FY2026, with interest coverage expected at 1.3 to 1.5 times, compared to 1.5 to 1.7 times in FY2025.However, the report noted that despite the projected losses, the numbers remain well below the pandemic-era levels, when the industry reported losses of Rs 2.16 lakh crore in FY2022 and Rs 1.79 lakh crore in FY2023.
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It also highlighted that aviation turbine fuel (ATF) prices and fluctuations in the rupee-dollar exchange rate will remain critical cost drivers. Fuel accounts for 30-40 per cent of an airline’s operating costs.
ATF prices averaged Rs 87,962 per kilolitre in the first five months of FY2026, 8 per cent lower year-on-year but significantly higher than the pre-COVID levels of Rs 64,715 per kilolitre. Meanwhile, the rupee depreciated 3 per cent against the US dollar in the first four months of FY2026, adding to cost pressures. The industry experienced a 5% capacity increase in FY2025, with the fleet size reaching 855 aircraft as of March 31, 2025. Indian airlines have placed large aircraft purchase orders, with over 1,600 pending deliveries scheduled over the next decade, a substantial portion of which is earmarked for replacing older planes with fuel-efficient models.Fleet grounding due to engine failures and supply chain issues has reduced from 20-22 per cent in September 2023 to 15-17 per cent in March 2025, corresponding to around 130 aircraft, ICRA added. (ANI)
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(The above story is verified and authored by ANI staff, ANI is South Asia’s leading multimedia news agency with over 100 bureaus in India, South Asia and across the globe. ANI brings the latest news on Politics and Current Affairs in India & around the World, Sports, Health, Fitness, Entertainment, & News. The views appearing in the above post do not reflect the opinions of LatestLY)
