The Indian aviation industry is projected to maintain a stable outlook for the financial year 2025-26, according to a report by the credit rating agency ICRA. This stability is attributed to moderate growth in domestic air passenger traffic and a relatively stable cost environment. Domestic air passenger traffic is expected to grow by 7-10%, while international passenger traffic for Indian carriers is anticipated to expand by 15-20%.
However, the industry faces challenges, including elevated aviation turbine fuel (ATF) prices and the depreciation of the Indian Rupee against the US Dollar, which significantly impact operating costs. Fuel expenses account for 30-40% of airlines’ costs, and a substantial portion of other expenses, such as aircraft lease payments and maintenance, are dollar-denominated. Airlines are striving to maintain adequate passenger load factors (PLF) while managing these cost pressures.
ICRA estimates that the industry will report net losses of ₹20-30 billion in 2024-25 and 2025-26, a significant improvement compared to the losses of ₹235 billion and ₹174 billion reported in 2021-22 and 2022-23, respectively. The pace of recovery in earnings is expected to be gradual due to the high fixed-cost nature of the business.
The report also highlights supply chain challenges, including engine failures in Pratt & Whitney engines, which have affected operations for airlines like Go Airlines and IndiGo. Despite these hurdles, the Indian aviation sector is poised for moderate growth, with efforts to enhance profitability through fare adjustments and operational efficiencies.
