India’s domestic aviation market began FY27 on a weaker footing, with passenger traffic declining in April as higher airfares, rising fuel prices and operational disruptions linked to geopolitical tensions weighed on travel demand, according to the latest industry assessment by ICRA.
Domestic air passenger traffic stood at 14.08 million passengers in April 2026, down 1.6 per cent from 14.31 million passengers recorded in April 2025. Traffic also declined 2 per cent sequentially from 14.37 million passengers handled in March 2026, according to ICRA’s latest aviation outlook report.
The slowdown marks a subdued start to the new financial year for an industry that continues to face pressure from escalating operating costs, supply chain constraints and uncertainty arising from the conflict in West Asia.
ICRA attributed the decline primarily to moderation in discretionary travel demand as passengers grappled with higher ticket prices.
The ratings agency noted that airlines have been facing an increasingly challenging cost environment, forcing carriers to manage capacity carefully while attempting to protect margins.
Key traffic indicators for April 2026 included:
The reduction in flight departures indicates that airlines responded to weaker demand and mounting cost pressures by limiting capacity deployment.
Despite softer traffic volumes, airlines continued to operate with relatively strong seat occupancy levels.
Passenger load factor, a measure of how effectively airlines fill available seats, stood at an estimated 85.9 per cent in April 2026. While slightly lower than the 86.8 per cent recorded a year earlier, it remained significantly higher than the 83.4 per cent reported in March 2026.
The figures suggest that airlines maintained disciplined capacity management even as overall passenger numbers softened.
A major challenge for carriers remains the sharp rise in aviation fuel costs.
According to the ICRA report, aviation turbine fuel (ATF) prices for domestic routes in May 2026 were 23.5 per cent higher year-on-year, although prices remained largely unchanged compared with April levels.
Fuel remains one of the largest components of airline operating expenditure.
The report highlighted that:
As a result, airlines continue to face dual pressure from both elevated fuel prices and depreciation of the rupee against the US dollar.
The combination has increased operating expenses at a time when passenger demand growth is showing signs of moderation.
The latest figures also illustrate how traffic growth has moderated across both domestic and international operations.
For the full FY26 financial year, domestic passenger traffic reached 167.74 million passengers, representing growth of 1.4 per cent over FY25.
The performance remained within ICRA’s projected growth range of 0-3 per cent, but reflected a considerably slower pace than the strong post-pandemic recovery witnessed in earlier years.
International traffic also expanded at a slower-than-expected rate.
Indian carriers transported 35 million international passengers during FY26, representing year-on-year growth of 3.9 per cent.
This fell below ICRA’s earlier projection of 7-9 per cent growth, which had been made before geopolitical tensions in West Asia intensified.
The deterioration in international operating conditions has affected route economics, flight schedules and passenger demand across several markets.
ICRA maintained its negative outlook on the Indian aviation sector, citing a combination of geopolitical, operational and financial challenges.
The agency identified several factors likely to continue affecting profitability during FY27:
The report noted that airlines are increasingly being forced to operate longer routes because of airspace limitations linked to the West Asia conflict. These detours increase fuel consumption and raise overall operating costs.
ICRA had previously projected that industry net losses would narrow to between Rs 11,000 crore and Rs 12,000 crore in FY27, compared with estimated losses of Rs 17,000 crore to Rs 18,000 crore in FY26.
However, the escalation of geopolitical tensions since late February 2026 has introduced what the agency described as a "downward bias" to those expectations.
Operational challenges are also being compounded by persistent supply chain disruptions affecting the global aviation industry.
The report highlighted continuing issues linked to Pratt & Whitney engine problems, which have forced a significant number of aircraft out of service.
As of March 2026:
Although this marks an improvement from the 20-22 per cent grounding rate recorded in September 2023, the situation continues to constrain fleet availability and network planning.
ICRA also referred to the operational disruptions experienced by InterGlobe Aviation, parent company of IndiGo, during December 2025. At the peak of those disruptions, approximately 1,600 flights were cancelled in a single day, driven by a combination of stricter crew duty regulations, adverse weather conditions and technical challenges.
Recognising the pressures facing airlines, authorities have introduced a series of measures designed to provide short-term relief.
Recent support initiatives include:
These measures are expected to provide partial support to airline finances, although industry executives continue to face a difficult operating environment.
The April traffic figures underline the fragile balance currently facing Indian aviation. Passenger demand remains sizeable, and load factors continue to hold at healthy levels, but rising costs and geopolitical uncertainty are eroding profitability across the sector.
While airlines are expected to benefit from ongoing travel demand and government support measures, ICRA’s assessment suggests that recovery in profitability could take longer than previously anticipated. Much will depend on fuel prices, currency movements, the resolution of supply chain challenges and the evolution of geopolitical tensions that continue to affect global aviation networks.
For now, the industry has entered FY27 facing a more complex and uncertain operating environment than many carriers had anticipated at the beginning of the year.
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