India's domestic air passenger traffic growth slowed to its weakest pace since the pandemic recovery, rising just 1.33% year-on-year to 16.75 million in FY26, according to data from the Directorate General of Civil Aviation (DGCA). This represents a sharp decline from over 7% growth in FY25 and marks a steep moderation from the post-COVID rebound in FY22 and FY23, when growth had exceeded 50%. The slowdown was weighed down by reduced aircraft availability across airlines, with capacity utilisation of aircraft lower during the fiscal year.
During FY26, India's two largest operators, Air India and IndiGo, had fewer planes in operation following heightened regulatory scrutiny. An Air India plane crash in June led to increased scrutiny over the airline's safety, resulting in the company cutting back its winter schedule flights by 10% (November-March). IndiGo faced an operational meltdown in December due to its inability to manage revised pilot duty and rest hours, prompting the DGCA to order a 10% cut in its schedule until March. According to Gagan Dixit, senior vice president-aviation at Elara Securities, Air India's operating fleet was 270-280 planes while IndiGo's was around 375.
The capacity constraints were further compounded by technical issues across the industry. Ratings agency Icra Ltd noted that 117 aircraft remained grounded as of February 2026 due to Pratt & Whitney engine failures and supply chain issues, representing about 13-15% of the total industry fleet. Airlines continued to grapple with these challenges throughout FY26. Akasa Air added new planes but these were not significant enough to compensate for reduced capacities by the two large players, with the airline's fleet count at 38 as of April 2026.
The challenging conditions were evident in March 2026, when passenger traffic fell 0.87% year-on-year to 14.4 million from 14.54 million in March 2025, according to DGCA data. Icra had forecast a 1% rise to 14.68 million. The capacity deployment for March 2026 was lower by 3% compared to March 2025, with approximately 99,204 departures against 102,319 in March 2025. March marked the fifth month in FY26 with declining passenger traffic, following December's 4% decline, July and September's 3% each, and August's 1.4% decline.
While overall Indian passenger traffic grew 1.2x over the period, several regional airports have experienced exponential growth, with Agra, Hindon, and Tezpur airports seeing 7-10x growth, while Jalgaon, Bhuj, and Diu grew 3-5x. This indicates that traffic growth has been much stronger at smaller airports, albeit on a lower base. The government announced a modified UDAN scheme earlier this year, allocating ₹28,840 crore to connect 120 new destinations and cater to 40 million passengers over the next 10 years. The scheme now provides extended VGF support for 5 years and includes dedicated allocations for airport operations (9%), helipad development (13%), and indigenous aircraft acquisition (1%). Despite challenges, UDAN airports now account for 58% of India's airports, though they contributed only 2-3% of domestic passenger traffic in 2024-25.
