The Indian aviation industry ended FY25 with 7.8% YoY growth with domestic air passenger traffic rising to approximately 165.7 million. The outlook also remains stable — driven by expectations of moderate growth and a relatively steady cost environment in FY2026. Data released by ICRA also indicated that domestic air traffic for March 2025 was estimated at approximately 148.8 lakh — higher by ~11.3% on a YoY basis and ~5.9% higher than 140.4 lakh in February 2025.
The aviation industry has faced several challenges in recent years including supply-chain woes and the failure of Pratt and Whitney (P&W) engines supplied to various airlines. Both IndiGo and Go Airlines were badly impacted by the latter — being forced to ground more than half its fleet. Several airlines also faced challenges related to the availability of pilot and cabin crew, resulting in several flight cancellations and delays.
“The pace of recovery in industry earnings is likely to be gradual, owing to the high fixed cost nature of the business. ICRA estimates the Indian aviation industry to report a net loss of Rs. 20-30 billion in FY2025 and FY2026 compared to a net profit of ~Rs 16 billion in FY2024 due to anticipated pressure on yields as airlines strive to maintain adequate PLF amid continued elevated ATF prices,” the ICRA report explained.
The ratings agency also cited higher borrowing costs (due to increased lease liabilities with the scheduled aircraft deliveries for select airlines) as being likely to increase the interest burden for airlines. ICRA had indicated earlier this month that expected to witness topline year-on-year growth between 18% and 20% this fiscal — driven by a sustained improvement in passenger traffic, tariff hikes, and the ramp-up in non-aeronautical revenues.