Domestic airlines losses to widen in FY26 on weak passenger growth : ICRA
While fuel prices in the first five months of the current fiscal are 8 per cent lower, rupee has weakened by 3 per cent
Domestic airlines losses in FY26 are set to widen to ₹9,500-10,500 crore due to weak passenger growth, lower yields and rupee depreciation, rating agency ICRA said in its outlook on Thursday.
ICRA had projected ₹5,500 crore loss for domestic airlines in FY25. The actual losses in FY25 were higher with airlines losing nearly 6,500 crore on pre-tax basis, Ministry of civil aviation informed Lok Sabha last week.
The rating agency expects domestic passenger traffic to grow 4-6 per cent over previous year to 172-176 million and has lowered its earlier guidance of 7-10 per cent growth.
“Passenger traffic growth in Q1 FY26 was 4.4 per cent year-on-year, weighed down by cross-border escalations that had led to flight disruptions and cancellations, as well as travel hesitancy post the aircraft accident. Accordingly, the yields declined 4-5 per cent y-o-y in Q1 FY26,” ICRA said .
“A prolonged period of monsoons is likely to have affected air travel in July-August and now trade headwinds emanating from US tariffs are set to dampen business sentiments in the coming quarters, bringing more circumspection to travel,” it added.
Infact, domestic passenger growth showed decline for the first time since January 2022 as July numbers were 3 per cent lower on a y-o-y basis.
While fuel prices in the first five months of the current fiscal are 8 per cent lower, rupee has weakened by 3 per cent.
“While currency depreciation of this order may not be materially disruptive in isolation, it adds pressure to the cost structure of a loss-making industry where key expenses—aircraft lease payments, aircraft and engine maintenance costs, and debt servicing—are highly sensitive to currency movements. Although the domestic airlines have a partial natural hedge to the extent of earnings from their international operations, overall, they have net payables in foreign currency,” ICRA said.
Published on August 28, 2025
