Why ICRA Now Forecasts Rs 18,000 Cr Loss for Indian Aviation in FY26

The Indian domestic aviation industry is now expected to face significantly greater financial headwinds. Ratings agency ICRA has sharply increased its FY26 loss forecast for the sector. The projected net loss could reach between Rs 17,000 crore and Rs 18,000 crore.

This new figure is substantially higher than ICRA's previous projection. The agency had earlier estimated a net loss of Rs 9,500-10,500 crore for the fiscal year 2025-26.

Key Factors Behind the Revised Forecast

ICRA's downward revision stems from a combination of operational and macroeconomic challenges. These factors are expected to severely dampen passenger demand and increase operating costs for carriers.

Slowdown in Passenger Traffic Growth

The ratings agency has dramatically lowered its outlook for domestic air passenger traffic growth. The forecast for FY26 is now just 0-3 per cent, a significant drop from the earlier projection of 4-6 per cent.

This slower-than-expected growth was already visible in the April-November period of FY26. Domestic air passenger traffic for this period showed only a 2.2 per cent year-on-year growth.

• Air India Boeing 787-8 Tragedy: The June crash of an Air India Boeing 787-8 led to traveler hesitation. This aircraft accident tragedy impacted sentiment immediately following the event.
• IndiGo Operational Disruptions: Thousands of IndiGo flight cancellations in early December also hurt travel sentiment. These operational disruptions resulted in around 4,500 cancelled flights between December 3 and 8.
• Geopolitical and Trade Headwinds: Cross-border escalations caused flight disruptions and cancellations. Additionally, US tariffs created headwinds, dampening business travel and overall sentiment.

Rising Financial Pressures

Beyond lower passenger numbers, financial pressures are widening the Rs 18,000 cr net loss projection. A major contributor is the rupee depreciation USD exchange rate.

Many key airline expenses are dollar-denominated. These costs include aircraft lease payments and maintenance fees. A weaker rupee leads to higher foreign exchange losses, increasing the overall cost base for Indian carriers.

International Traffic and Industry Outlook

ICRA also revised its outlook for international passenger traffic growth. The forecast for Indian carriers for this fiscal year is now 7-9 per cent. This is down from the previous projection of 13-15 per cent.

Despite the massive projected loss, the Indian aviation industry remains a major focus for global commercial aviation news [https://flying.flights]. The sector continues to grapple with high fuel costs and capacity challenges.

For November 2025, domestic air passenger traffic was estimated at 1.54 crore. This was an 8.4 per cent increase over November 2024. However, the cumulative impact of recent events has necessitated the severe ICRA revised forecast.

Stakeholders, including Boeing and the DGCA (Directorate General of Civil Aviation), are closely monitoring the situation. The operational stability of major carriers like IndiGo is critical to the sector's recovery.

This significant financial downgrade highlights the volatility facing the Indian market. Airlines must navigate lower demand and rising dollar-linked costs simultaneously. This combination makes achieving profitability in FY26 extremely challenging.