Why Did ICRA Raise Indian Aviation's FY26 Loss Forecast to Rs 18,000 Crore?

The Indian aviation industry loss is set to widen significantly. Ratings agency ICRA now projects a net loss of Rs 17,000-18,000 crore for the current fiscal year (FY26). This is a major increase from its earlier forecast. The previous projection for the ICRA net loss forecast was Rs 9,500-10,500 crore.

ICRA cites multiple factors for this sharp downward revision. These include lower passenger traffic and currency pressures. The agency also revised its FY26 domestic air traffic growth forecast. It now expects growth of only 0-3 per cent, down from 4-6 per cent.

International traffic growth for Indian carriers was also cut. The new projection is 7-9 per cent, down from 13-15 per cent. Domestic traffic grew 2.2 per cent year-on-year in April-November 2025. This was slower than expected, impacting the overall outlook.

Key Factors Driving the Rs 18,000 Crore Loss

Multiple operational and geopolitical events impacted travel sentiment. Cross-border escalations led to flight disruptions and cancellations earlier in the year. Business travel also faced headwinds from US tariffs, ICRA noted.

Safety and Passenger Sentiment

The revision accounts for the Air India Boeing 787-8 aircraft accident in June. This tragedy made travellers hesitant, at least immediately after the event. Such incidents can temporarily dampen passenger confidence.

Operational Disruptions

IndiGo flight cancellations in early December also weighed on the forecast. The airline cancelled around 4,500 flights between December 3 and 8. While this was only 0.4 per cent of annual departures, it affected sentiment. The operational issues at IndiGo were a key consideration in the report.

Financial Headwinds and Currency Risk

Financial factors significantly contributed to the higher loss estimate. The Rupee depreciation USD resulted in foreign exchange losses for airlines. Most airline costs are dollar-denominated, including leases and maintenance. A weaker rupee increases operational expenses substantially. This currency risk compounds the financial stress on carriers.

Aviation Market Outlook

ICRA's revised forecast signals continued financial volatility for the sector. Airlines may face pressure to raise airfares to offset costs. This could, in turn, impact consumer spending on air travel.

• The industry's dollar-denominated costs are a major vulnerability.
• Capacity rationalization may occur due to slowing demand.
• The financial health of carriers remains challenging.

Despite the immediate challenges, ICRA maintains a stable outlook for the industry. The agency expects disruptions to be temporary in nature. Capacity expansion plans for carriers like Boeing and Airbus remain critical for future growth. Stakeholders can find more commercial aviation news and analysis at flying.flights. The International Air Transport Association (IATA) continues to monitor global and regional financial performance. The focus now shifts to how airlines manage these cost pressures and rebuild passenger confidence through FY26.