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What happened
ICRA has projected that India's domestic air travel demand will see a modest growth of 4-6% in FY26, primarily due to external factors like geopolitical flare-ups and tariff shocks. The agency maintains a stable outlook for the aviation sector, noting that domestic passenger traffic has been tempered by safety concerns following an aircraft accident in June 2025 and trade headwinds from US tariffs. Despite the subdued domestic outlook, international passenger traffic for Indian carriers is expected to grow significantly by 13-15%, driven by stronger performance on overseas routes. The report also highlights financial pressures on airlines, including rising fuel costs and operational challenges, which continue to strain their financial health.
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Key insights
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1
Modest domestic growth: Domestic air travel demand is projected to rise by only 4-6%.
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2
Surge in international traffic: International passenger traffic for Indian carriers expected to grow by 13-15%.
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3
Financial pressures on airlines: Rising fuel costs and operational challenges are straining airline finances.
Takeaways
While domestic air travel in India faces significant challenges, the international segment shows promising growth. Airlines must navigate financial pressures to capitalize on this opportunity.