India’s aviation industry is projected to decrease net losses by around one-third to Rs 110–120 billion in 2026-27, with domestic passenger traffic growth anticipated to recover to 6-8 percent, according to a report. The report by ICRA highlighted that the current losses of Rs. 170–180 billion are expected to see a substantial reduction as domestic traffic is forecasted to reach 175–179 million passengers by 2026-27.
The growth in international air passenger traffic for Indian carriers is predicted to remain relatively robust, supported by factors such as a low base effect, expanding e-visa/visa-on-arrival coverage, and the government’s emphasis on developing theme-based and iconic tourist destinations. ICRA estimated international air passenger traffic growth at 7-9 percent for 2025-26 and 8-10 percent for 2026-27.
Stating a Stable outlook for the Indian aviation industry, Kinjal Shah, Senior Vice President and Co-Group Head at ICRA, mentioned expectations of modest growth in domestic air passenger traffic and an improving operating environment despite near-term challenges. The industry experienced moderate domestic growth in the current fiscal year due to various factors like cross-border escalations, weather disruptions, travel hesitancy post an aircraft accident in June 2025, and operational issues at IndiGo in December 2025.
Aviation turbine fuel (ATF) prices and the rupee-dollar exchange rate significantly impact airlines’ profitability, with fuel accounting for 30-40 percent of their operating costs. The report noted that ATF averaged Rs. 91,173 per kilolitre (KL) in 11 months of 2025-26, while the rupee depreciated about 3.2 percent year-on-year in nine months of the same period.
“While currency depreciation may not be highly disruptive on its own, it does add pressure to the cost structure of a loss-making industry where key expenses are sensitive to currency movements,” the report highlighted.
