The current fiscal year has seen a period of modest domestic air passenger traffic growth due to cross-border escalations, weather-related disruptions, travel hesitancy following the June 2025 aircraft accident, the impact on business travel owing to the headwinds stemming from elevated US tariffs, and operational disruptions at IndiGo in December 2025.
| Photo Credit:
V RAJU
India’s domestic air passenger traffic is expected to grow by 6-8 per cent to reach 175-179 million passengers in 2026-27, rating agency ICRA estimated on Tuesday (February 24, 2026).
In December 2025, ICRA had revised its domestic air passenger growth estimates to 0-3 per cent for 2025-26 from 4-6 per cent envisaged earlier.
As per the rating agency, the international air passenger traffic growth for Indian carriers is expected to remain relatively stronger, aided by low base effect, expanding e-visa or visa-on-arrival coverage, and the Government of India’s focus on developing theme-based and iconic tourist destinations.
Consequently, ICRA estimated international air passenger traffic growth at 7-9 per cent for 2025-26 and 8-10 per cent for 2026-27.
Moreover, ICRA projected the net loss of the Indian aviation industry to reduce to ₹110-120 billion (₹11,000-12,000 crore) in 2026-27 from an elevated ₹170-180 billion (₹17,000-18,000 crore) in 2025-26.
The current fiscal year has seen a period of modest domestic air passenger traffic growth due to cross-border escalations, weather-related disruptions, travel hesitancy following the June 2025 aircraft accident, the impact on business travel owing to the headwinds stemming from elevated US tariffs, and operational disruptions at IndiGo in December 2025.
According to Kinjal Shah, Senior Vice President & Co-Group Head, ICRA, the rating agency has maintained a Stable outlook for the Indian aviation industry, supported by expectations of modest growth in domestic air passenger traffic and a gradually improving operating environment, despite near-term challenges.
“The Indian aviation industry is expected to report a net loss of ₹170-180 billion (₹17,000-18,000 crore) in 2025-26, significantly higher than the estimated net loss of around ₹55 billion (₹5,500 crore) in 2024-25. However, the same is likely to reduce to ₹110-120 billion (₹11,000-12,000 crore) in 2026-27, led by growth in domestic air passenger traffic and expected normalisation of operations post disruptions seen in 2025-26 that had resulted in flight cancellations and passenger refunds,” Shah said.
“The industry’s debt metric, which weakened in 2025-26 with an estimated interest cover of 0.7-0.9 times from 1.8 times in 2024-25, is also expected to improve to 1.3-1.5 times in 2026-27, despite increasing debt linked with new aircraft deliveries.”
Besides, ICRA cited that the industry saw around 4 per cent capacity addition in CY2025 and the total number of aircraft stood at 865 as on December 31, 2025.
Various industry players have announced large aircraft purchase orders and, as per the indicative numbers, the total pending aircraft deliveries stand at more than 1,700 as on January 31, 2026, which are likely to be received over the next 10 years.
A large part of these orders is towards replacement of old aircraft with new fuel-efficient ones, ICRA said.
“Engine failures and supply chain challenges had resulted in grounding of 20-22 per cent of the total industry fleet as of September 2023. The same has come down to 13-15 per cent as of February 2026, corresponding to 117 aircraft,” Shah said.
Published on February 24, 2026