Air India. (Signal photo)Image Credit Source: Nicolas Economou/Nurphoto Via Getty Images
According to the credit rating firm ICRA, India’s aviation industry is estimated to record a net deficit between ₹ 20-30 billion in the financial year 2025-26 (FY26), corresponding to the estimated loss of FY 2024-25 (FY25). The company said in a report that this deficit is expected to continue in FY 2024 as compared to a net profit of about ₹ 16 billion, as the airlines are trying to maintain adequate passenger load factor (PLF) amidst steadily increase in the prices of aviation turbine fuel (ATF), which is expected to put pressure on returns.
Why loss is happening
The report said that the demand for air travel remains strong, but due to competitive pressure and price sensitivity in the domestic market, there is no possibility of a significant increase in ticket prices by the airlines. With expensive fuel, this is expected to affect profitability. Increasing financial stress, due to rising lease liabilities, interest costs are expected to increase in FY 26, as many airlines have determined delivery of aircraft. The growing loan burden is expected to increase the finance cost, which will reduce the margin further.
Thick loss has happened before
Despite these challenges, there is a significant improvement in the estimated losses of FY 26 compared to the heavy decline of the past. The industry had recorded a shocking loss of Rs 235 billion in FY22 and Rs 174 billion in FY 23, mainly due to disruptions related to Kovid-19 and fluctuations in fuel costs. However, financial flexibility is slowly improving. The region’s instrument coverage ratio, which is a major indicator of its capacity to repay the loan, is expected to live between 1.5 and 2.0 times in FY 26, which indicates a relatively stable loan-servisory capacity even among the pressures of profits.
Domestic air traffic declines
For June 2025, domestic air passenger traffic was estimated at 138.7 lakhs, which is 5.1 percent more than 132.1 lakhs of June 2024. However, on a gradual basis, it saw a slight decline of 1.3 percent. Airlines’ capacity deployment in June 2025 was 4.9 percent higher than June 2024; However, this was 2.3 percent less than in May 2025. For the first quarter of FY 2026 (April-June 2025), domestic air passenger traffic was 422.4 lakhs, showing an increase of 5.1 percent year-on-year.
International air traffic increases
In May 2025, the international passenger traffic for Indian aviation companies was 29.7 lakhs, showing an increase of 7.3 percent compared to the previous year. However, due to geopolitical adversities, it was 7.9 percent less on a gradual basis. In the second half of FY 2026, international passenger traffic for Indian aviation companies was 59.8 lakhs, showing an increase of 12.1 percent compared to the previous year. For FY 2025 (April 2024-March 2025), domestic air passenger traffic was around 1,653.8 lakhs, showing an increase of 7.6 percent as compared to the previous year. In addition, in FY 2025, international passenger traffic for Indian aviation companies was 338.6 lakhs, showing a 14.1 percent increase compared to the previous year.