India’s aviation sector is expected to face significantly deeper financial losses in FY27, with rating agency ICRA sharply revising its net loss estimate to ₹36,000–38,000 crore.
The downgrade reflects a combination of rising operating costs, currency depreciation, elevated aviation turbine fuel (ATF) prices, higher aircraft lease rentals, and weaker passenger demand amid geopolitical tensions in West Asia.
This revised projection is a steep deterioration from ICRA’s earlier estimate of ₹11,000–12,000 crore in losses.
The agency noted that airlines are increasingly unable to fully pass on rising costs to passengers through higher fares, leading to widening financial stress across the sector.
According to ICRA, the ongoing West Asian conflict, which escalated after February 2026, is expected to weigh on air traffic growth in FY27.
Alongside this, depreciation of the Indian rupee against the US dollar has significantly increased expenses for airlines, particularly for leasing and maintenance payments, which are dollar-denominated.
Higher ATF prices and continued aircraft additions are also pushing up overall cost structures.
ICRA has also revised its FY26 loss estimate for the aviation sector to ₹32,000–34,000 crore, nearly double its earlier projection of ₹17,000–18,000 crore.
The sharper loss outlook is attributed to foreign exchange losses, slower passenger demand growth, and elevated fuel prices following crude oil volatility linked to the West Asian conflict.
Passenger traffic trends further reflect the weakening environment. Although domestic air traffic rose 11.3% year-on-year to 1.56 crore passengers in May 2026, growth is expected to slow.
ICRA has cut its domestic passenger growth forecast for FY27 to 3–6%, down from 6–8% earlier, citing higher fares and inflationary pressures that are affecting discretionary spending.
International traffic has been even more impacted, with Indian carriers recording a 39% year-on-year decline in April 2026 due to disruptions from the West Asian conflict.
As a result, ICRA has revised its international traffic growth forecast down to 0–3%, from 8–10% earlier.
ATF prices remain a key pressure point, with June 2026 levels about 27% higher year-on-year, further squeezing airline margins.
Combined with rising lease costs from new aircraft deliveries, the outlook for airline profitability remains under significant strain.
