ICRA cuts growth forecast for FY26 as India’s air travel slows down

Domestic air travel in India showed little movement in August, with passenger numbers rising only 0.3% year-on-year to 13.17 million, according to credit rating agency ICRA.

Because of this slow trend, ICRA has revised its forecast for FY26, expecting domestic air passenger growth at only 4-6%, compared to its earlier projection of 7-10%.

This means the total number of domestic flyers is now expected to reach 172-176 million in FY26, after touching 165.4 million in FY25 (a growth of 7.6%).

International travel estimates for Indian carriers have also been cut. ICRA now expects 13-15% growth in FY26, down from the earlier forecast of 15-20%.

The downgrade comes after cross-border tensions, flight disruptions, and growing travel hesitation following a recent aircraft accident. Global trade concerns, including the effect of US tariffs, are also expected to hit demand.

With demand slowing down, ICRA has projected that India’s airlines will face net losses of INR 9,500–10,500 crore in FY26, almost double the INR 5,500 crore losses in FY25. Losses are expected to rise as airlines take deliveries of new aircraft but struggle to fill seats due to weak growth.

The industry’s flying capacity also fell, with 5.8% lower deployment in August 2025 compared to a year earlier.

A major reason is the large number of aircraft grounded due to supply chain and engine issues, particularly with Pratt & Whitney engines. As of March 31, 2025, about 133 aircraft were grounded, nearly 15-17% of the total fleet.

Although aviation turbine fuel (ATF) prices have eased, falling 1.4% in September 2025 and averaging INR 95,181 per kilolitre in FY25, almost 8% lower than last year, airlines are still struggling.

This is because many of their biggest expenses, such as fuel, aircraft leases, and maintenance, are paid in US dollars. With the rupee-dollar exchange rate fluctuating, cost pressures remain high.

The report also said that while some airlines are in a stronger position due to parent company support and better liquidity, others continue to face stress.

Despite some improvements in recent years, the credit health of weaker airlines is expected to stay under pressure in the near term.