India's Air Traffic Growth Slashed by Icra: Will Disruptions Slow Aviation Recovery?

December 29, 2025 at 06:54 PM•3 min read

Rating agency Icra slashed India's FY26 domestic air traffic growth forecast to 0-3% citing the Air India AI-171 crash and massive IndiGo flight cancellations.

Key Points

1Icra drastically cut India's FY26 domestic air traffic growth forecast to 0-3%, down from an earlier 4-6%.
2The downgrade is directly attributed to the Air India flight AI-171 crash in June and 4,500 IndiGo flight cancellations in December.
3International traffic growth was also revised down to 7-9%, and industry net losses are projected to widen significantly.
4Weaker business travel demand due to global economic headwinds is compounding the operational and safety concerns.

The Indian commercial aviation sector faces a sharp slowdown.

Rating agency Icra has significantly cut its India air passenger growth outlook. The forecast for FY26 aviation forecast is now just 0-3% for domestic traffic. This is a major downgrade from the earlier estimate of 4-6% growth. Icra cited multiple factors for this revision. These include major flight disruptions and escalating safety concerns. The agency also noted weaker business travel demand. This downturn is linked to persistent global trade headwinds.

Safety and Operational Setbacks

Two major incidents heavily impacted air travel sentiment this fiscal year. The first was the tragic crash of Air India flight AI-171 in June. The Boeing 787-8 Dreamliner crashed shortly after takeoff from Sardar Vallabhbhai Patel International Airport in Ahmedabad. This incident, sometimes referred to as the Ahmedabad air tragedy, made travelers hesitant. It caused immediate disruption to Air India's international schedule.

The second major event involved IndiGo flight cancellations in December. The country's largest airline cancelled approximately 4,500 flights between December 3 and 8. This operational disruption further dented consumer confidence. The cancellations were linked to the transition to new DGCA pilot duty norms. The Directorate General of Civil Aviation (DGCA) granted temporary relief to the airline.

Economic Headwinds and Financial Impact

Icra's Icra domestic air traffic revision reflects a slow first eight months of FY26. Beyond safety issues, economic factors are weighing on growth. The agency specifically flagged headwinds stemming from US tariffs as a factor. This has kept business travel demand under pressure.

International Traffic: The forecast for Indian carriers' international passenger traffic was also reduced. It is now expected to grow at 7-9%, down from 13-15%.
Financial Losses: The slower growth and operational hurdles will widen India airline net losses. Icra projects a significant increase in industry net losses. Some reports indicate a revised estimate of ₹17,000-18,000 crore for the fiscal year.

This downgrade underscores the challenges in the Indian commercial aviation market. While aircraft load factors have touched record highs, capacity deployment has declined. Supply chain disruptions and engine issues, particularly with Pratt & Whitney engines, have grounded many aircraft. The industry must now navigate safety concerns and economic pressures. Passengers rely on timely and safe air travel, which is currently a risk. The Boeing [https://www.boeing.com] fleet and its maintenance remain a focus. The path to recovery for the sector will be closely watched by those following aviation news [https://flying.flights].