ICRA sounds alarm on Indian aviation, sees ₹38,000-crore loss in FY27 despite govt support

India's aviation industry is expected to post a net loss of ₹36,000-₹38,000 crore in the financial year 2026-27, according to ratings agency ICRA.

The agency had earlier projected industry losses of ₹11,000-₹12,000 crore for FY2027 but said the outlook had worsened because of higher aviation turbine fuel (ATF) prices, the depreciation of the rupee, increased aircraft lease rentals and softer passenger traffic growth.

ICRA also revised its estimate for FY2026 losses to ₹32,000-34,000 crore from its earlier forecast of ₹17,000-18,000 crore, citing foreign exchange losses, slower passenger traffic growth and higher fuel prices.

The ratings agency cut its forecast for domestic passenger traffic growth in FY2027 to 3%-6% from 6%-8% earlier.

It also reduced its growth estimate for international passenger traffic carried by Indian airlines to 0%-3% from 8%-10%.

“This is primarily due to the escalation of the West Asian conflict and its consequent adverse impact on passenger traffic, the INR and ATF prices, albeit partially mitigated by calibrated ATF price interventions by the Government of India, along with an expected increase in lease rentals owing to the continued aircraft deliveries,” ICRA said.

Domestic passenger traffic rose 11.3% year-on-year to 156.4 lakh passengers in May, helped by a favourable base after travel demand was hit in May 2025 following the Pahalgam attack and the subsequent military conflict between India and Pakistan.

However, domestic traffic for the first two months of FY2027 grew only 3.8% from a year earlier, while domestic passenger traffic increased just 1.2% in FY2026.

ICRA said fuel continues to account for 30%-40% of airline operating costs, while 35%-50% of costs, including fuel, aircraft lease rentals and maintenance expenses, are denominated in U.S. dollars, leaving airlines exposed to a weak rupee.

The agency said government measures, including temporary reductions in airport charges, lower state taxes on aviation fuel, an emergency credit guarantee scheme and a new aviation fuel price stabilisation fund, would provide partial relief but were unlikely to fully offset the pressure from elevated costs.

ICRA added that supply chain issues linked to Pratt & Whitney engine problems continued to weigh on the sector.