New Delhi [India], [India], November 18 : Rating agency ICRA has affirmed "stable" outlook on Indian civil aviation industry, with expectations that will witness modest 4-6 per cent growth in domestic air passenger traffic in the current financial year 2025-26.
For April-October 2025, domestic air passenger traffic remained at 944.5 lakh, reflecting a year-on-year growth of 1.6 per cent, ICRA said.
The growth in the Indian aviation industry this fiscal could have been higher but for events like cross-border escalations (that had led to flight disruptions and cancellations earlier during the year) and the unfortunate AI171 tragedy in June 2025 that increased travel hesitancy, at least in the period immediately post the accident.
These factors, coupled with trade headwinds stemming from US tariffs, are set to dampen business sentiments in the coming quarters, bringing more circumspection to travel, the rating agency noted, while affirming "stable" sectoral outlook.
Likewise, the Air Traffic Control (ATC)-related disruptions seen in November 2025, leading to flight cancellations, would be an additional (although milder) growth dampener, ICRA has asserted.
As for international air passenger traffic growth for Indian carriers, ICRA projects this be in the range of 13-15 per cent in 2025-26.
"The yield movement will remain monitorable due to its linkage with aviation turbine fuel (ATF) prices and the INR to USD exchange rate, both of which have a significant bearing on airlines' cost structures," ICRA said in a statement.
The average ATF prices stood at Rs 95,181/KL) in 2024-25, 8.0 per cent lower on a year-on-year basis, ICRA said. Furthermore, ATF prices from April 1, 2025, to November 1, 2025, have decreased by 6.5 per cent year-over-year.
Fuel costs account for 30-40 per cent of airlines' operating expenses, including aircraft lease payments.
ICRA expects the Indian aviation industry to report a net loss of Rs 95-105 billion in 2025-26, compared to an estimated net loss of around Rs 55 billion in 2024-25.
"Losses are set to increase principally due to a slowdown in passenger traffic growth amid a period of rising aircraft deliveries. Nonetheless, the expected losses are significantly lower than Rs 216 billion and Rs 179 billion reported in 2021-22 and 2022-23, respectively," ICRA said.
A select few airlines face financial challenges and liquidity issues.
"While some airlines have adequate liquidity and/or financial assistance from strong parent companies, supporting their credit profiles, the credit metrics and liquidity profiles of others continue to remain under pressure, despite some improvement in recent years," ICRA noted.