India’s aviation sector may look like it’s booming, but the money tells a different story.
Credit rating agency ICRA has projected a ₹30 billion net loss for Indian aviation in FY26. This comes even as more Indians fly than ever before. The skies are busy—but airlines are not making profits.
Why? Let’s break it down.
High Demand, But No Pricing Power
Flights are often full. In June 2025, domestic air traffic hit 138.7 lakh passengers, a 5.1% rise from last year. International travel also rose by over 12% year-on-year in the first two months of FY26.
So, what’s the problem?
Ticket prices aren’t rising. Airlines are caught in a price war. The Indian market is very price-sensitive—most people won’t pay more, even if the planes are full.
This means airlines can’t increase fares, even when fuel and leasing costs go up.
Fuel Costs Still High
Aviation turbine fuel (ATF) prices are still high. This is a major cost for airlines. It cuts deep into their profits.
Even though fuel prices are lower than during the pandemic, they are still hurting margins.
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Lease and Interest Costs Growing
ICRA also pointed out that airlines are expanding fleets using leased aircraft. This means higher interest payments and bigger lease bills.
As a result, airlines are spending more to keep up with growing demand—without earning more.
Not as Bad as the Pandemic, But Still Bleeding
Let’s keep things in perspective. During the COVID-hit FY22, the sector posted a ₹235 billion loss. FY23 followed with ₹174 billion in losses.
So, the projected ₹30 billion loss in FY26 looks better. But it still shows that airlines are struggling to stay profitable.
Signs of Stability, But Far to Go
ICRA said the interest coverage ratio (a measure of how well companies can pay interest on debt) may be between 1.5 and 2.0 in FY26. That’s a small sign of financial stability.
Still, margins are thin, and profit remains out of reach.
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