India’s aviation sector is set for another year of heavy turbulence, with losses projected to almost double to ₹9,500–10,500 crore in FY2026 from an estimated ₹5,500 crore last fiscal, according to ratings agency ICRA.

The grim forecast comes on the back of geopolitical tensions, trade disruptions, and waning passenger confidence following the tragic Air India Boeing 787-8 crash in Ahmedabad on June 12 that killed 260 people. While pre-booked tickets cushioned June travel numbers, July data showed a clear dent, with domestic passenger volumes falling nearly 3 per cent year-on-year. Air India alone lost about 4 lakh passengers in July, surrendering 1 per cent of its domestic market share.

ICRA noted that domestic passenger traffic is expected to touch 172–176 million flyers in FY2026, reflecting only 4–6 per cent growth — well below earlier expectations of 7–10 per cent. “The industry benefited from stronger pricing power in FY2025, but the demand environment has become increasingly cautious,” said Kinjal Shah, Senior Vice President & Co-Group Head at ICRA.

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Weighing down sentiment are cross-border tensions that disrupted routes, prolonged monsoons that hampered travel in July and August, and fresh trade headwinds from US tariffs that threaten business travel. Passenger yields already slipped 4–5 per cent in the first quarter of FY2026, underscoring the pressure on airlines.

At the same time, airlines are rapidly expanding fleets. The sector added 5 per cent capacity in FY2025 to reach 855 aircraft by March 2025, and over 1,600 pending aircraft deliveries are lined up for the next decade. While many of these will replace older jets with fuel-efficient models, the mismatch between slower passenger growth and faster capacity expansion is expected to weigh heavily on profitability.

Losses projected for FY2026, though lower than the pandemic-hit peaks of ₹21,600 crore in FY2022 and ₹17,900 crore in FY2023, underline the fragile state of India’s aviation industry as it juggles safety concerns, economic uncertainties, and fleet expansion.

Industry watchers say airlines may have to recalibrate growth plans, diversify revenue streams, and lean harder on ancillary earnings to weather the turbulence ahead.

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