Rating agency ICRA has revised its overall airport passenger traffic growth projection for FY26 to 5-7 per cent YoY, the lowest since Covid. The rating agency has revised the airport passenger traffic growth estimates lower from the earlier estimates of 7-9 per cent.
The report highlighted that the overall airport passenger traffic is expected to reach 43- 44 crore in the current fiscal year. In FY25, the total airport passenger traffic reached 41 crore, registering about 9% YoY growth.
Reason for the downgrade
ICRA stated that the downward revision is a result of cross-border tension and lower aircraft availability due to stricter fleet inspection following the unfortunate Air India crash in June. The incident has led to a compression of passenger traffic growth in the April-August FY26.
International traffic to boost
ICRA, however, highlighted that the moderate growth in the current fiscal year will be supported by strong growth in international travel, driven by improving connectivity to new destinations.
The report noted that this continued uptick in leisure and business travel in the domestic segment, along with the start of operations at new greenfield airports in H2 FY26, is expected to further drive growth.
ICRA warned that geopolitical tensions and US trade wars are likely to continue posing a threat to these estimates.
Vinay Kumar G, Sector Head, Corporate Ratings, ICRA, said in a statement, “International traffic continues to outpace domestic traffic growth, driven by healthy international tourism activity, along with improved connectivity to newer destinations. The healthy rise in international traffic will augur well for the airport sector, given that it is relatively more remunerative than domestic traffic.
Cargo traffic growth
According to ICRA, the overall air cargo volume growth is likely to slow to 4-6 per cent in FY26, down from 10 per cent in FY25. This is due to the expectation of lower growth in international cargo volumes amid the US trade war and the high base effect of the last fiscal year.
Last fiscal, the Red Sea crisis led to an increase in air cargo volumes from Q4 FY24 to Q3 FY25. ICRA report adds that domestic cargo volumes are likely to increase by 5-7 per cent in FY26 compared to 2-4 per cent growth in international volumes.
Capex growth
ICRA stated that the sector will continue to see substantial capex in the coming years. It says that investments of more than Rs 1,00,000 crore are expected over the next 4-5 years, including new airports in Jewar, Navi Mumbai, Chennai and Pune and further expansion and upgradation of airports like Bangalore, Hyderabad, Cochin, Mumbai and Nagpur.
ICRA’s Kumar added that the operating margins are likely to remain healthy at around 51-52 per cent during FY2026-FY2027. He adds that after completion of capex at some of the key airports, the interest expense is expected to increase (which were earlier capitalised), resulting in some moderation in interest coverage during FY2026.
“However, given the healthy profitability margins, the debt coverage metrics are expected to remain comfortable over FY2026-FY2027. The credit profile of airport operators is projected to remain stable, supported by healthy accruals and comfortable liquidity.” Kumar said