ICRA keeps ‘stable’ outlook; projects up to 6% growth in domestic air traffic for FY26

The domestic air passenger traffic for October is projected to be 142.8 lakh, which is a 4.5 per cent increase year-on-year (YoY) and a 12.9 per cent rise from September, marking a strong sequential growth, according to the latest report by ICRA.

Stable outlook for FY2026: ICRA

ICRA continues to have a 'stable' outlook for the Indian aviation industry, forecasting a 4-6 per cent growth in domestic passenger traffic for FY26. This is after a 7.6 per cent increase in FY2025, with total passenger numbers increasing to 1,653.8 lakh.

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The travel demand was strong and was also backed by an increase in capacity. The report estimates domestic departures to be around 99,816 in October, which is a sequential growth of 10.8 per cent and a YoY increase of 1.7 per cent.

The industry also showed improved efficiency with the Passenger Load Factor (PLF) of 84.7 per cent being the highest among 82.4 per cent in October 2024 and 81.4 per cent in September 2025.

The report, however, noted that growth prospects for the current fiscal year have been reduced as a result of the ongoing border tensions, global disruptions, and travel caution in the wake of the June 2025 aircraft disaster, plus Air Traffic Control (ATC) operational disruptions.

According to the report, Indian international airlines brought in 2.83 million passengers in September 2025, which is 5.8 per cent more than in the previous year.

ICRA predicts that FY26 will witness a growth of 13–15 per cent in international passenger traffic for Indian airlines due to the expanded international routes and the increased availability of aircraft.

On the other hand, the increase in Aviation Turbine Fuel (ATF) prices is still creating a problem for the airlines. ATF prices in November were at a YoY increase of 4.4 per cent and a 0.8 per cent increase from October. The report mentions that the airline industry is still concerned about the price escalation because fuel is a cost factor contributing to 30–40 per cent of airlines' operating costs.

Key challenges and concerns

1) Financial Pressure: Net loss projected to widen to Rs 95–105 billion in FY2026.

2) Cost Rise: ATF prices up 4.4 per cent YoY, squeezing airline margins.

3) Operational Hurdles: ~133 aircraft grounded due to supply chain/engine issues since March 2025.

In order to attract more passengers, the DGCA has suggested new rules for the cancellation of tickets or changes to be made within 48 hours of booking without any charge. The new rules apply to flights that are more than five days later on domestic routes and over 15 days for international travel.

Refunds will be required to be processed within 21 working days, thereby providing quicker redress for passengers.