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ICRA has projected that the Indian aviation industry's net losses are expected to decline to around INR 11,000-12,000 crore in FY27, compared to an estimated INR 17,000-18,000 crore in FY26. The improvement is linked to a recovery in domestic passenger traffic, which is expected to grow by 6-8 percent after remaining largely flat in the current year. While operational disruptions, foreign exchange losses and higher costs impacted performance recently, easing aircraft groundings and stable yields could support gradual financial recovery.
ICRA has stated that the Indian aviation industry is likely to report net losses of around INR 11,000-12,000 crore in FY27, marking a significant reduction from the estimated INR 17,000-18,000 crore loss in FY26. The rating agency had earlier projected lower losses for FY26, but later revised its estimates upward due to operational challenges and weaker-than-expected performance. Advertisement
The industry's losses in FY26 were sharply higher than the INR 5,600 crore reported in FY25. According to ICRA, the increase was largely due to flight disruptions, higher passenger refunds, elevated operating expenses and foreign exchange losses arising from the depreciation of the rupee against the USD. Several airlines also faced supply-side constraints because of aircraft groundings linked to engine issues and maintenance delays.
Domestic passenger traffic growth remained muted in FY26, with volumes largely flat compared to the previous year. ICRA had reduced its traffic growth projections earlier, citing cross-border tensions, the impact of an aircraft accident in the previous year and softer business travel demand. However, traffic is now expected to improve in FY27, with growth estimated at 6-8 per cent, supported by stable demand conditions and gradual capacity addition.
Passenger yields saw pressure during the year, with a year-on-year decline in pricing. Going forward, yields are expected to stabilise as disruptions ease and capacity constraints reduce. Aviation turbine fuel prices and the USD-INR exchange rate will continue to remain key variables influencing airline profitability, as fuel and lease liabilities form a major portion of airline costs.
The number of grounded aircraft has reduced compared to earlier levels, helping improve capacity deployment. Indian carriers also have a sizeable order book for new aircraft, including fuel-efficient models, which are scheduled for phased induction over the coming years. This fleet expansion is expected to support long-term growth, though near-term profitability will depend on cost control and stable demand.
ICRA has maintained a stable outlook on the sector. It has indicated that geopolitical developments, fuel price volatility and currency fluctuations remain key risks that could affect financial performance.
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