ICRA pegs aviation sector losses at Rs 17-18k crore in FY26

Bengaluru: The domestic aviation industry is projected to post a net loss of Rs 17,000-18,000 crore in FY2025-26, according to ICRA. Earlier, the ratings agency had estimated a lower loss of Rs 9,500-10,500 crore for the current fiscal.

In its latest report on the Indian aviation sector, released on Monday, ICRA said the sharp upward revision is primarily driven by IndiGo’s elevated losses arising from large-scale flight cancellations, passenger refunds and higher operating costs following operational disruptions in the first week of December, which affected around 4,500 flights. Losses are also expected to widen due to a moderation in passenger traffic growth coinciding with a phase of rising aircraft deliveries. The industry’s interest coverage ratio is now projected at 0.7-0.9 times for FY2026, the report noted.

ICRA has also revised its forecast for domestic air passenger traffic growth to 0-3% in FY2026, compared with its earlier estimate of 4-6%, reflecting weaker-than-anticipated growth in the April–November period, when traffic rose only 2.2% year-on-year. The slowdown was partly attributed to cross-border tensions that led to flight disruptions earlier in the year, along with the Air India Boeing 787-8 crash in Ahmedabad in June, which temporarily dampened traveller confidence, and pressures on business travel owing to US tariff headwinds.

Further, the weakening of the Indian rupee against the US dollar in Q2 FY2026 resulted in sizeable forex losses for airlines, although a significant share of these remain unrealised. With the rupee continuing to depreciate in Q3 FY2026, carriers are expected to face additional forex-related pressures, weighing on profitability.

While IndiGo’s cancellations accounted for only about 0.4% of total annual industry departures, ICRA expects travel sentiment to be impacted in the near term. However, it has retained a stable outlook on the sector, stating that the disruptions are likely to be temporary. Its growth projection for FY2027 remains unchanged at 6-8%, though the low base of FY2026 implies lower-than-earlier estimated domestic passenger traffic at 17.5-18.2 crore for FY2027, compared with the previous forecast of 17.9-18.6 crore.

Meanwhile, domestic air passenger traffic for November 2025 was estimated at 1.54 crore, up 8.4% year-on-year and 10.1% higher than October 2025. For April-November 2025, traffic stood at 10.96 crore, reflecting 2.2% growth, while the highest single-day traffic of 5,38,429 passengers was recorded on November 23, 2025.

ICRA also revised its international traffic growth forecast for Indian carriers in FY2026 to 7-9%, from 13-15% earlier, while the November 2025 passenger load factor was estimated at 92.7%.