Rating agency ICRA said that Indian airlines are expected to reduce losses to an estimated Rs 11,000-12,000 crore in the next fiscal, from a projected Rs 17,000-18,000 crore this financial year.
“The Indian aviation industry is expected to report a net loss of Rs 170-180 billion in 2025-26, significantly higher than the estimated net loss of around Rs 55 billion in 2024-25. However, the same is likely to reduce to Rs 110-120 billion in 2026-27, led by growth in domestic air passenger traffic and expected normalisation of operations post disruptions seen in 2025-26 that had resulted in flight cancellations and passenger refunds,” Kinjal Shah, senior vice president at ICRA.
Kinjal Shah added that ICRA, has maintained a “stable outlook” for the Indian aviation industry, supported by expectations of modest growth in domestic air passenger traffic and a gradually improving operating environment, despite near-term challenges.
Passenger growth
ICRA also estimates the domestic air passenger traffic to grow by 6-8 per cent and touch 175-179 million passengers in FY2026-27. ICRA, in December 2025, revised its domestic air passenger growth estimates to 0-3 per cent for the current financial year, down from the 4-6 per cent envisaged earlier.
The international air passenger traffic growth for Indian carriers is expected to remain relatively stronger, aided by low base effect, expanding e-visa/visa-on-arrival coverage, and the Central Government’s focus on developing theme-based and iconic tourist destinations, the ratings agency said.
ICRA said the international air passenger traffic is seen growing at 7-9 per cent for this financial year and 8-10 per cent next year, and added that the current fiscal year has seen a period of modest domestic air passenger traffic growth due to cross-border escalations, weather-related disruptions, travel hesitancy following the June 2025 aircraft accident, the impact on business travel owing to the headwinds stemming from elevated US tariffs and operational disruptions at IndiGo in December 2025.
Industry yields
ICRA said that the yields of the industry have declined in the April-December period of 2025-26 on a YoY basis due to a series of external events like cross-border escalations, aeroplane crash and operational disruptions at IndiGo in the first week of December 2025
It added that despite these challenges, the drop in yields was not as steep as the reduction in fuel Cost per Available Seat Kilometre (CASK), as airlines sought to sustain yield amid rising cost pressure from currency fluctuations and operational expenses related to flight cancellations and delays, it said.
ICRA expects the yields to improve in the near term as temporary disruptions ease. Nonetheless, the movements in ATF prices and the USD-INR rate will remain key monitorables.
According to the ratings agency, the industry saw around 4 per cent capacity addition in CY2025, and the total number of aircraft stood at 865 as of December 31, 2025.