Indian aviation industry outlook for FY26 remains stable: ICRA
Rating agency ICRA has said that Indian aviation industry’s outlook for 2025-26 remains stable, driven by expectations of moderate growth in domestic air passenger traffic and a relatively stable cost environment. The domestic air passenger traffic is estimated to grow at 7-10 per cent in 2025-26. However, the yields for airline operators are likely to be under pressure, as airlines strive to maintain adequate passenger load factor (PLF). International passenger traffic for Indian carriers is expected to grow by 15-20 per cent in 2025-26.
It stated ‘The movement in the yields will remain monitorable, amid elevated aviation turbine fuel (ATF) prices and depreciation of the INR vis-a-vis the USD over pre-Covid levels, both of which have a major bearing on the airlines’ cost structure.’ Fuel cost accounts for 30-40 per cent of the airlines’ expenses, while 35-50 per cent of the operating expenses, including aircraft lease payments, fuel expenses and a significant portion of aircraft and engine maintenance expenses, are denominated in dollar terms.
Moreover, it said the airlines’ efforts to effect fare hikes, proportionate to their input cost increase, will be the key to expand their profit margins. Further, it asserted that the industry’s net losses to remain range-bound. The pace of recovery in industry earnings is likely to be gradual, owing to the high fixed-cost nature of the business.
