India’s domestic air passenger traffic likely to grow by 3-6% in FY27: ICRA

24 Jul 2026 Evaluate

Ratings agency ICRA in its latest report has said that India’s domestic air passenger traffic is likely to grow by 3-6 per cent in FY27. However, it has maintained a negative outlook on the country's aviation industry, citing profitability concerns and industry-wide challenges. It also expects Indian airlines' international passenger traffic to witness a modest 0-3 per cent increase during the fiscal. It said the moderation reflects the impact of instability in West Asia, which has increased airline operating costs, pushed up airfares and is likely to curb discretionary travel spending due to inflationary pressures.

The agency cautioned that any prolonged continuation or further escalation of the West Asian conflict could further weigh on traffic growth, yields and profitability because of sustained high fuel prices, airspace restrictions and persistent inflation. It estimates the aviation industry will report a net loss of Rs 36,000-38,000 crore in FY27, compared with an estimated Rs 32,000-34,000 crore loss in FY26. The higher losses are expected to be driven by the depreciation of the Indian rupee against the US dollar, elevated Aviation Turbine Fuel (ATF) prices and rising lease rentals as airlines continue to induct new aircraft.

It said the negative outlook reflects the expected weakening of the revenue per available seat kilometre - cost per available seat kilometre (RASK-CASK) spread due to hardening of jet fuel prices and disruptions in the availability of certain international airspaces starting February 28, 2026, following escalation of the conflict in West Asia, coupled with continued depreciation of the Indian Rupee against the US Dollar. Further, flight cancellations amid airspace closures have impacted international air travel demand, with some of the carriers having already announced curtailment of international flights in the coming few months. The onset of the hostilities in West Asia since end-February 2026 is expected to result in subdued air passenger traffic growth in FY2027, it said.

On fuel costs, ICRA noted that Jet fuel or Aviation Turbine Fuel (ATF) prices in July remained unchanged for both domestic and international routes on a sequential basis, with the prices announced on July 1 kept unchanged for both domestic and international routes vis-A -vis June 2026 prices. Domestic ATF prices have been unchanged since April 2026, in the absence of any price revisions by oil marketing companies (OMCs) during the period. However, the prices for domestic routes in July are still higher by 18 per cent on a year-on-year basis while for international operations, the ATF prices in the current month remained unchanged on a sequential basis.

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