Domestic airlines are expected to post a net loss of ₹2,000-3,000 crore in FY2025 and FY2026 due to weak rupee and increased costs due to grounding of aircraft, rating agency ICRA said in its aviation sector outlook.

However, the loss will be lower compared to previous years on account of healthy traffic growth, anticipated improvement in yields and decline in interest costs, it added.

ICRA’s senior vice president and co-group head Kinjal Shah said improved pricing power will support airline financial performance.

Domestic air traffic is expected to grow by 7-10 per cent to 164-170 million in FY 2025 while international traffic carried by Indian carriers will rise by 15-20 per cent due to high demand from leisure segments and favourable visa policies. As such airlines’ revenue is expected to grow by 10-15 percent in fiscal FY 25 and 26.

ICRA has maintained a stable outlook for the Indian aviation sector on the back of better pricing discipline, improvements in aircraft infrastructure and increased connectivity to tier II and III cities.

While there has been some improvement over the last year, 16-18 per cent of India’s airline fleet ( 144 aircraft) is grounded. Last year the share of grounded aircraft was 20-22 per cent. This has resulted in higher expenses as airlines resort to higher cost wet leases and fly less fuel efficient planes.

“ICRA believes that capacity addition for the industry will only be gradual as the supply chain challenges faced by the aircraft and engine OEMs may result in intermittent delays in deliveries. Furthermore, a sizeable part of the fleet addition by airlines will be meant for expanding international operations.,” Shah added.

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