New Delhi [India], February 21 : The Indian aviation industry is expected to report a net loss of Rs 2,000-3,000 crore in both FY25 and FY26, according to a report by ICRA. This comes after the sector posted a net profit of approximately Rs 1,600 crore in FY24.
The losses are primarily attributed to pressure on ticket prices as airlines aim to maintain healthy passenger load factors (PLF) despite high aviation turbine fuel (ATF) prices. The industry is also expected to see a slow recovery in earnings due to its high fixed costs.
ICRA said "the Indian aviation industry to report a net loss of Rs. 20-30 billion in FY2025 and FY2026 compared to a net profit of ~Rs. 16 billion in FY2024 due to anticipated pressure on yields"
Another major challenge for airlines is rising borrowing costs. ICRA stated that the scheduled delivery of new aircraft will increase lease liabilities, adding to the interest burden.
However, the projected losses for the coming years are much lower than the Rs 23,500 crore and Rs 17,400 crore losses recorded in FY22 and FY23, respectively.
Despite financial challenges, the industry's debt levels are expected to remain stable, with an interest coverage ratio of 1.5-2.0 times in FY25. This suggests that airlines will still have some ability to manage their debt obligations.
ICRA noted that "The pace of recovery in industry earnings is likely to be gradual, owing to the high fixed cost nature of the business".
On the positive side, domestic air passenger traffic has shown strong growth. In January 2025, passenger traffic grew by around 14.5 per cent year-on-year and was nearly 17.9 per cent higher than pre-Covid levels. This indicates a steady demand for air travel, which could support the industry's long-term recovery.
While the Indian aviation sector faces short-term profitability challenges, increasing air travel demand and careful financial management by airlines may help improve performance in the coming years.