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ICRA cuts FY26 air traffic growth forecast to 4–6%, warns of deeper airline losses
With airlines adding more planes while demand grows slower than expected, industry losses are likely to swell to ₹95–105 billion, compared with ₹5.5 billion in FY2025: ICRA
New Delhi: India’s airlines may face deeper losses next year due to a slowdown in air travel growth, rating agency ICRA (Investment Information and Credit Rating Agency) said on Thursday.
The agency has cut its forecast for the financial year (FY) 2026, stating that domestic passenger traffic is expected to rise by only 4–6% to around 172–176 million fliers, down from its earlier projection of 7–10% growth.
With airlines adding more planes while demand grows slower than expected, industry losses are likely to swell to ₹95–105 billion, compared with ₹5.5 billion in FY2025, it said.
ICRA said that passenger traffic in the first quarter of FY2026 grew only 4.4% compared to last year, slowed down by flight disruptions caused by cross-border tensions and a dip in travel confidence following the recent Air India crash. This also pushed airline earnings lower, with average fares slipping 4–5% year-on-year.
“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. ICRA forecasts the Indian aviation industry to report a wider net loss of ₹95–105 billion in FY2026 compared to an estimated ₹55 billion in FY2025. Losses are set to shoot up principally because passenger traffic growth will be slowing down amid a period of rising aircraft deliveries,” senior vice president and co-group head of ICRA Kinjal Shah said.
Also Read: Domestic air passenger traffic up 6% in June 2024: ICRA
Shah said that engine failures and supply chain challenges had caused 20–22% of the total industry fleet to have been grounded as of September 2023. “This proportion has come down to around 15–17% as of March 2025, corresponding to around 130 aircraft,” Shah added.
A statement issued by the agency said, “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.”
The losses forecast by ICRA for FY2026, however, remain significantly lower than those reported in FY2022 and FY2023, at ₹216 billion and ₹179 billion, respectively.
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Talking about the total number of aircraft in the country, ICRA said the industry saw around 5% capacity addition in FY2025 to reach 855 aircraft as of March 31 this year.
Various industry players have announced large aircraft purchase orders and, as per indicative numbers, the total pending aircraft deliveries is more than 1,600, which are likely to be received over the next 10 years.
“A reasonably large part of these is towards replacement of old aircraft with new fuel-efficient ones,” the agency said.
