ICRA expects domestic air passenger traffic growth for FY26 at 0-3 per cent and international passenger traffic growth for Indian carriers at 7-9 per cent
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PRAKASH SINGH
Indian airlines continue to face a double whammy of revenue loss arising from flight cancellations and increased expenses due to airspace closures and extended flight durations.
India carriers are not operating to Bahrain, Doha and Kuwait while offering limited services to Oman, Saudi Arabia and UAE. The geopolitical tensions have resulted in further weakening of rupee and domestic jet fuel prices are also expected to witness a sharp price revision from April 1.
India’s largest carrier IndiGo has said it may have to recalibrate its capacity based as the operating environment remains fluid. The airline said there is a material escalation in operating costs and fuel and forex related costs expected to increase substantially. “While we have introduced a fuel surcharge to compensate for some of this cost, this and other fare increases required will have an effect on demand,” IndiGo said.
“West Asia is an important market for Indian carriers and cancellations will impact revenue. This would have been a busy season for travel given Eid holidays in West Asia and school and college vacations in India,” an aviation expert said.
Outlook revised
Rating agency ICRA on Friday revised its outlook on the Indian aviation industry to negative from stable, citing cost pressures and downside risks to demand.
ICRA expects domestic air passenger traffic growth for FY26 at 0-3 per cent and international passenger traffic growth for Indian carriers at 7-9 per cent indicating a relatively weak near-term demand environment.
ICRA’s earlier growth forecast for FY27, formulated prior to the West Asian conflict, estimated domestic air passenger traffic growth at 6-8 per cent and international traffic growth for Indian carriers at 8-10 per cent. However, these projections now carry a downward bias. Flight cancellations due to airspace closures, coupled with higher airfares following the levy of fuel surcharges (estimated at 5-6 per cent of average ticket prices), are expected to weigh on passenger traffic growth. Additionally, rerouting of flights is likely to increase fuel burn and operating costs, the rating agency said.
Published on March 27, 2026