According to Icra's latest report, India's domestic air passenger traffic increased 1.4% year-on-year to 1,677.4 lakh in FY26, meeting the agency's forecast range of 0-3%. For FY25, the combined passenger count for all Indian carriers was 1,653.8 lakh, indicating steady growth in the domestic aviation sector. The ratings agency noted that for March 2026, domestic air passenger traffic rose 1% year-on-year to 146.8 lakh, with airlines operating with 3% less capacity compared to the same month in the previous year. As reported by Icra, the recovery remained gradual amid capacity adjustments and cost-related challenges for airlines, with domestic travel demand staying resilient despite these constraints.
As reported by Icra, the domestic aviation industry operated at a passenger load factor of 89.5% in March 2026, significantly higher than 86% in March 2025. This improvement in load factors suggests better capacity utilization and operational efficiency across the airline sector. The agency's data indicates that airlines are managing to optimize their fleet deployment more effectively despite the challenging operating environment. During March 2026, airlines deployed 3% lower capacity compared to March 2025, yet achieved higher passenger load factors due to strong demand, demonstrating the sector's ability to maximize available capacity despite capacity constraints.
According to Icra's analysis, international passenger traffic for Indian carriers in February 2026 stood at 28.5 lakh, declining 0.3% year-on-year and falling 16% sequentially. For the April-February period of the previous fiscal, international traffic was recorded at 331.5 lakh, showing growth of 7.7%. The sequential decline in international traffic reflects the impact of geopolitical tensions and operational challenges facing airlines serving international routes. International traffic trends remained uneven, reflecting both seasonal and global factors, with the data highlighting measured recovery and ongoing cost sensitivities within the Indian aviation industry.
As reported by Icra, average aviation turbine fuel (ATF) prices announced on April 1, 2026, rose 9.2% sequentially and 18.2% year-on-year due to the West Asian conflict. While crude oil prices rose 45.5% month-on-month in March 2026 due to the geopolitical crisis, the pass-through to ATF prices was moderated. Despite the civil aviation ministry capping domestic ATF price increases at 25% sequentially, oil marketing companies raised ATF prices by only 9.2% sequentially in April 2026 for domestic operations, helping moderate the immediate cost impact on the aviation sector. However, Icra notes that crude oil prices remain elevated, which can impact ATF prices in the future, while the continuing weakening of the rupee against the US Dollar is another concern for the aviation sector.
