Domestic air passenger traffic to see modest increase to reach 172-176 million in FY26

New Delhi, Aug 28 India’s domestic air passenger traffic is set to witness a modest increase to reach 172-176 million in FY26, reflecting a growth of 4-6 per cent over the previous year, a report projected on Thursday.

The moderation in passenger traffic growth comes at a time when aircraft deliveries are rising, according to rating agency ICRA.

Passenger traffic growth in Q1 FY26 was 4.4 per cent (on-year), weighed down by cross-border escalations, that had led to flight disruptions and cancellations, as well as travel hesitancy post the aircraft accident tragedy.

Accordingly, the yields declined by 4-5 per cent YoY in Q1 FY26. A prolonged period of monsoons is likely to have affected air travel in July-August 2025 and now trade headwinds emanating from US tariffs are set to dampen business sentiments in the coming quarters, bringing more circumspection to travel.

“During FY25, the Indian aviation industry benefited from improved pricing power, evident in higher yields, driven by healthy demand for air travel. However, the demand environment has turned more cautious in FY26,” said Kinjal Shah, Senior Vice President and Co-Group Head, ICRA.

ICRA forecasts the Indian aviation industry to report a net loss of Rs 95-105 billion in FY2026 compared to an estimated Rs 55 billion in FY25, as passenger traffic growth slows down amid a period of rising aircraft deliveries.

The losses forecast for FY26, however, remain significantly lower than those reported in FY22 and FY23 at Rs 216 billion and Rs 179 billion, respectively.

The aviation industry saw around 5 per cent capacity addition in FY25 to reach 855 aircraft as on March 31, 2025.

Various industry players have announced large aircraft purchase orders and as per the indicative numbers, the total pending aircraft deliveries is more than 1,600, which are likely to be received over the next 10 years.

A reasonably large part of these is towards replacement of old aircraft with new fuel-efficient ones.

“Engine failures and supply chain challenges had caused 20-22 per cent of the total industry fleet to have been grounded as of September 2023. This proportion has come down to around 15-17 per cent as of March 2025, corresponding to around 130 aircraft,” Shah noted.

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