ICRA raises India airline loss forecast to ₹36,000–38,000 crore on weak demand and rising costs

India’s aviation industry is headed for deeper financial stress this fiscal year, with ratings agency ICRA sharply revising its loss estimates amid rising operating costs and weakening demand conditions.

The agency now expects domestic carriers to report a combined net loss of ₹36,000–38,000 crore, significantly higher than earlier projections. The downgrade is driven by a mix of factors including the depreciation of the Indian rupee against the US dollar, elevated jet fuel prices, and rising aircraft lease rentals as airlines continue to expand fleets.

ICRA also flagged that geopolitical tensions in West Asia have disrupted air traffic flows and added further pressure on international travel demand, leading to higher fares and tighter consumer spending.

For FY2026, the industry is now estimated to have posted losses of ₹32,000–34,000 crore, far worse than earlier expectations. A major reason, according to ICRA, is steep foreign exchange losses combined with weaker-than-expected passenger growth and higher aviation turbine fuel (ATF) costs linked to crude oil volatility.

Looking ahead, the agency has also cut its growth outlook. Domestic air passenger traffic is now expected to grow 3–6%, down from earlier estimates of 6–8%, while international traffic growth for Indian carriers has been sharply reduced to 0–3% from 8–10%.

ICRA noted that while traffic in May 2026 showed an 11.3% year-on-year rise, this was largely due to a low base created by disruptions in the previous year. However, international traffic saw a steep 39% year-on-year decline in April 2026, reflecting the impact of regional conflict.

Despite higher fleet utilisation and strong load factors of 88.8% in May, ICRA warned that cost pressures may continue to outpace airlines’ ability to raise fares, keeping profitability under strain in the near term.