Forecast Indicates Widened Losses for Indian Airlines in FY2026

Indian Airline Industry Losses Set to Increase in FY2026

Indian airlines are anticipated to face significantly larger net losses in the fiscal year 2026, with expectations ranging between INR 95-105 billion, up from INR 55 billion recorded in FY2025. This forecast comes amidst a period of slower growth in passenger traffic, an increase in aircraft fleet size, and external economic pressures impacting the aviation sector.

Passenger Traffic and Revenue Challenges

Domestic air passenger numbers are projected to grow modestly by 4-6 percent, reaching approximately 172 to 176 million passengers. This forecast is notably lower than previous estimates of 7-10 percent growth, signaling restrained demand. The yield, or revenue per passenger, is expected to drop by 4-5 percent in the first quarter of FY2026. Factors contributing to this include disruptions from cross-border tensions, a reduction in flight demand triggered by recent aircraft accidents, and prolonged monsoon weather affecting travel patterns.

Financial and Operational Pressures on Airlines

Despite a more challenging environment, losses in FY2026 are predicted to remain less severe than those in 2022 and 2023, when they peaked at INR 216 billion and INR 179 billion respectively. Fuel costs and currency fluctuations remain critical variables influencing airline profitability. Aviation Turbine Fuel (ATF) comprises 30-40% of operating expenses. While average ATF prices have decreased by 8% year-on-year, they still exceed pre-pandemic levels. In addition, a 3% depreciation of the Indian rupee against the US dollar has increased expenses related to leases, maintenance, and debt servicing for dollar-denominated costs.

Fleet Expansion and Operational Hurdles

India’s airline fleet reached 855 aircraft by March 2025, reflecting a 5% capacity increase for FY2025. More than 1,600 aircraft deliveries are expected over the next decade, aimed mostly at replacing older models with more fuel-efficient ones. However, ongoing technical challenges such as engine failures and supply chain issues have grounded a significant portion of the fleet — approximately 15-17%, or around 130 planes, as of March 2025, although this is an improvement from previous months. These operational constraints add layers of complexity to airlines’ recovery efforts.

A Brief Historical Context of Airline Industry Losses

The Indian aviation sector has experienced fluctuating fortunes over the past years. Following steep losses during the COVID-19 pandemic years (INR 216 billion in 2022 and INR 179 billion in 2023), the industry saw some recovery fueled by pent-up travel demand and improved pricing power. However, the recent forecast indicates a return to wider losses, albeit smaller than those faced during the pandemic peak. The challenge of balancing expansion with rising costs, fuel price volatility, and global economic uncertainties has long been a hurdle for airlines.

Historically, Indian airlines have been affected by cyclical downturns compounded by external factors such as geopolitical disruptions and fluctuating currency exchange rates. These elements tend to influence air travel demand both domestically and internationally, a pattern consistent in global aviation markets as well.

Looking Ahead: Impact on Travel and Tourism

The slower growth in domestic passenger traffic and the financial pressures facing airlines could temper the pace of domestic and international travel expansion in India. Reduced airfare yields and cautious travel demand may influence tourist flows to and from the country. This environment requires strategic adjustments by airlines and travel operators to maintain service levels and continue supporting India’s growing role as a travel destination in global tourism circuits.

Implications for Boating and Coastal Destinations

Given India’s expansive coastlines and popular maritime tourism hubs, shifts in airline performance and passenger traffic growth have indirect effects on boating-related travel and activities. Many coastal destinations rely on a steady influx of tourists arriving by air to sustain charter services, yacht rentals, and other marine recreation industries. Therefore, the aviation sector’s health can influence demand for boating excursions, sailing experiences, and marine tourism infrastructure development along India’s beaches and marinas.

Summary and Final Thoughts

In summary, the Indian airline industry is poised for increased financial losses in FY2026 due to moderated passenger growth, rising fleet capacity, and external economic challenges. Despite some operational improvements and a less severe outlook compared to peak pandemic losses, the ongoing pressures highlight the fragile balance between growth and cost management in this sector. As the aviation industry adapts, its ripple effects will be felt across tourism and related sectors, including yacht charters, boating, and water-based activities in key coastal destinations.

For travelers and enthusiasts seeking to explore India’s coastal gems by sea, the health of the aviation industry remains a crucial factor in accessibility and price dynamics for boat rentals and yachting adventures. Services like GetBoat.com provide an excellent platform for booking sailing yachts and boats in the region, catering to diverse tastes and budgets amidst evolving travel landscapes.