ICRA Raises Forecast Losses for Indian Aviation to 360-380 Billion Rupees in 2027
Key Facts
ICRA has raised its estimate for net losses in India’s aviation sector in fiscal 2027 to 360-380 billion rupees, from a previous estimate of 110-120 billion rupees. The agency said the adverse impact of the conflict in West Asia is evident in higher jet fuel prices, a weaker rupee against the dollar and subdued passenger traffic growth. The new forecast follows losses that ICRA estimated at 280-300 billion rupees for the sector in fiscal 2026. This means the agency expects losses to continue next year and widen from its previous estimate for the period. ICRA also maintained its negative outlook for the sector, amid risks to demand, yields and profitability.
ICRA expects modest growth of 3-6% in domestic air passenger traffic in fiscal 2027. The agency attributed its forecast to the conflict in West Asia’s impact on travel demand and to higher ticket prices. The forecast follows a 6.3% year-on-year decline in domestic traffic in August 2026, to 121.3 lakh passengers from 129.5 lakh in August 2025. Traffic nevertheless rose 1.1% from July, when it stood at 120.0 lakh passengers. The figures show a limited monthly improvement alongside an annual decline, while the agency expects traffic growth to remain subdued in the next fiscal year.
International passenger traffic at Indian airlines fell more sharply at the start of fiscal 2027. It declined 20.9% year on year in the five months from April to August 2026, after growing 3.9% in fiscal 2026 to 350.0 lakh passengers. The comparison puts international travel traffic below its level in the previous year, alongside the domestic demand slowdown ICRA expects. The agency said weak passenger traffic is one factor behind its loss forecast. It also limits airlines’ ability to offset higher costs through revenue growth.
Fuel pressures are evident in the accelerating annual increase in domestic jet fuel prices, which reached 18.0% in July 2026, then 24.7% in August and 33.4% in September. Fuel accounts for 30-40% of airline operating expenses, according to ICRA, making price increases a direct driver of the cost base. Currency risks add to the pressure, as 35-50% of companies’ costs are denominated in dollars, including fuel, aircraft leases and maintenance. The agency said a weaker rupee against the dollar, alongside high prices and slower passenger traffic, explains its loss forecast. It also cited engine and maintenance problems and the realignment of international capacity as constraints on capacity growth.
The Indian government approved one-time support of up to 10,000 crore rupees for oil marketing companies in June 2026, to help stabilize jet fuel prices for scheduled airlines. The civil aviation minister said the increase in basic domestic fuel prices was capped at 25%, and landing and parking charges for domestic airlines were cut by 25%. In April, Air India Group announced distance-based adjustments to domestic fuel charges after a decision to cap increases in domestic jet fuel prices at 25%. The company said the average global jet fuel price rose to 195.19 dollars per barrel in the week ended March 27, from 99.40 dollars at the end of February, an increase of nearly 100%. These measures and the company’s response illustrate the pressure that prompted the fee adjustments, while domestic fuel prices continued to post accelerating annual increases in the following months.
ICRA said a continuation or escalation of the conflict in West Asia could pose further downside risks to its forecasts for passenger traffic growth, yields and profitability, citing high fuel prices, airspace restrictions and inflationary pressures. The sector’s negative outlook remains tied to these risks, alongside the weak rupee and expected slowdown in domestic traffic. India is scheduled to release its October 2026 Index of Industrial Production data on November 30, 2026. The date is part of the upcoming economic data calendar, as the sector outlook tracks passenger traffic and operating costs.