Domestic aviation sector’s loss may widen to `9,500-10,500 cr in FY26

Mumbai: The domestic aviation industry’s net losses are expected to nearly double to Rs 9,500–10,500 crore in FY26, driven by slowing passenger growth and rising costs linked to new aircraft deliveries, ac-cording to a report by Icra released on Tuesday.

Despite maintaining a stable outlook and projecting 4–6 per cent domestic passenger traffic growth for FY26, the rating agency said the sector’s financial performance will remain under pressure.

Icra estimates the industry’s net loss to widen to Rs 95–105 billion in FY26 from around Rs 55 billion in FY25, as moderat-ing demand and higher capital and operational expenses weigh on carriers. The industry’s interest coverage ratio is projected to remain between 1.5 and 1.7 times.

Even with these pressures, the projected losses are far lower than the steep losses of Rs 21,600 crore and Rs 17,900 crore reported in FY22 and FY23.

Domestic passenger traffic grew 7.6 per cent last fiscal, reaching 16.53 crore travellers.

However, growth this year is expected to stay subdued due to cross-border tensions, global disruptions, post-tragedy travel hesitancy following the June 2025 aircraft crash, and recent air traffic control-related disruptions.

In October, domestic air traffic is estimated at 1.43 crore passengers, up 4.5 per cent year-on-year and 12.9 per cent compared with September.

This growth was supported by increased capacity, with domestic departures rising to nearly 99,816 — a 10.8 per cent sequential increase and a 1.7 per cent rise year-on-year.

The sector continues to face supply chain issues and widespread aircraft groundings due to engine failures.

As of March 31, 2025, around 133 aircraft across major airlines were grounded, accounting for 15–17 per cent of the total fleet.

These challenges have pushed up costs through grounding expenses, higher lease rentals for substitute aircraft, and reduced fuel

efficiency.