ICRA project in cost pressure on Indian aviation sector net loss of Rs 30 billion in fiscal 26
According to the credit rating agency ICRA, the Indian aviation sector is expected to have a net loss of Rs 20-3 billion in fiscal year 2025-26 (FY26). The estimated losses are consistent with the estimated losses for fiscal year 2024-25 (FY25), reflecting ongoing challenges of fuel costs, fare pricing and high fees associated with rentals.
ICRA highlights in its report that despite strong demand for air travel, airlines are still working to increase fares due to intense competition and high price sensitivity in the domestic market. Coupled with the rising price of aviation turbine fuels (ATFs), airline earnings and profitability are expected to weigh.
As airlines continue to expand fleets by leasing aircraft, interest costs are expected to increase in fiscal 26. Increased leasing liabilities may increase financing costs, thereby further reducing profit margins.
However, the expected losses for FY26 are significantly lower than setbacks in the pandemic era. The industry reported a net loss of Rs 23,500 crore in fiscal 2021-22 and Rs 17,400 crore in fiscal 2022-23, mainly due to interference and fluctuations in fuel prices due to Covid-19-19.
ICRA notes that financial stability is gradually improving. The industry’s interest coverage is expected to range from 1.5 to 2.0 times in FY26, indicating a modest resilience in debt service capacity despite persistent bottom line pressure.
Passenger traffic figures reflect potential demand intensity. In June 2025, domestic air passenger volume was estimated at Rs 13.87 lakh, marking a year-on-year increase of 5.1%, but 1.3% higher than the capacity deployment in May 2025 than June 2024. Compared with June 2024, it was a 4.9% decrease, but the order was 2.3%.
In the first quarter of FY26 (April to June 2025), domestic transport was Rs 422.4 lakh, a year-on-year increase of 5.1%. International transportation reached 2.97 million in May 2025, up 7.3% year-on-year, down 7.9% in April despite concerns over geopolitics. From April to May (FY2 million), international transportation grew by 12.1% to 5.98 million.
Domestic passenger volumes were approximately 1.6538 billion throughout the fiscal year, an increase of 7.6%. Air India’s international passenger transport was 33.86 million, up 14.1% from the previous year
