India’s aviation sector may move towards bigger losses in this financial year. Rating agency ICRA has increased the estimated net loss of Indian Airlines for the financial year 2026-27 (FY27) to Rs 36,000 to Rs 38,000 crore.
The agency says that pressure on airlines will increase due to decline in passenger demand due to weakness of rupee, high prices of Aviation Turbine Fuel (ATF), rising cost of leasing aircraft and ongoing tensions in West Asia.
Estimate of loss three times higher than earlier estimate
ICRA had earlier estimated the loss of airlines in FY27 to be Rs 11,000 to 12,000 crore. But now in view of the continuous increase in costs, the agency has increased this estimate to Rs 36,000 to Rs 38,000 crore.
The agency says that airlines will not be able to pass the entire burden of rising costs on passengers by increasing ticket prices, which will further increase their losses.
West Asia tension became a major reason
According to ICRA, the conflict that started in West Asia from the end of February 2026 is having an impact on air travel. Due to this, there is a possibility that the speed of passenger traffic, both domestic and international, will remain slow.
Also, due to the weakening of the rupee against the dollar, aircraft lease, maintenance and other foreign payments have become expensive. At the same time, high prices of ATF have further increased the operating expenses of airlines.
FY26 deficit estimate also increased
ICRA has also revised its estimates for FY26. While earlier the agency had estimated the loss at Rs 17,000 to 18,000 crore, now it has been increased to Rs 32,000 to Rs 34,000 crore. The reason for this has been said to be the sharp fall in the rupee, rise in crude oil prices and lower than expected increase in passengers.
Passenger traffic forecast also cut
ICRA has also reduced domestic and international passenger traffic estimates for FY27. Domestic passenger numbers were projected to grow by 11.3% year-on-year to 1.56 crore in May 2026, but the agency has reduced the domestic traffic growth forecast for the full year to 3-6% from 6-8%.
Similarly, the estimate of international passenger traffic has also been reduced from 8-10% to 0-3%. In April 2026, there was a 39% decline in international passenger numbers of Indian airlines due to tensions in West Asia.
Rising cost of fuel and lease poses a challenge
According to ICRA, ATF prices announced on June 1, 2026 were 26.9% higher than last year. Whereas in the first quarter of FY27, the average prices of ATF were 22.8% higher as compared to the same period last year.
Apart from this, lease expenses will also increase due to increase in delivery of new aircraft. Aircraft lease and maintenance costs are also likely to increase further due to the weakness of the rupee against the dollar.
However, in May 2026, airlines increased their flight capacity by 5.1% annually and during this period the passenger load factor of domestic flights stood at 88.8%, which is better than 83.9% last year and 82% in April 2026.
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