India’s domestic aviation industry is likely to post a net loss of around Rs 17,000–18,000 crore in FY26, significantly higher than earlier estimates, due to muted passenger growth, operational disruptions and currency depreciation, according to ratings agency ICRA.

Earlier, the industry was projected to report losses in the range of Rs 9,500–10,500 crore during the fiscal year. However, ICRA has revised its outlook after reassessing passenger traffic trends and recent disruptions across the sector.

The agency has lowered its forecast for domestic air passenger traffic growth to 0–3 per cent in FY26 from the earlier estimate of 4–6 per cent. This downward revision reflects slower-than-expected traffic growth during April–November FY26, impacted by cross-border escalations that led to flight disruptions and cancellations, along with the Air India Boeing 787-8 aircraft accident in June, which temporarily dampened travel sentiment.

ICRA also cited operational disruptions at IndiGo between December 3 and 8, during which around 4,500 flights were cancelled. Although these cancellations accounted for only about 0.4 per cent of annual industry departures, the incident is expected to weigh on passenger confidence in the near term. Additionally, business travel demand has been affected by global headwinds, including the impact of US tariffs.

On the international front, ICRA has revised the growth forecast for overseas passenger traffic by Indian carriers to 7–9 per cent from the earlier projection of 13–15 per cent.

The ratings agency further noted that depreciation of the rupee against the US dollar has resulted in foreign exchange losses, compounding financial stress on airlines.

Domestic passenger traffic stood at 1.54 crore in November 2025, up 8.4 per cent year-on-year, while traffic for April–November 2025 reached 10.96 crore, marking a modest growth of 2.2 per cent.