India's air travel demand is expected to rise by only 4-6% in FY26 due to geopolitical tensions and tariff impacts. However, international traffic is projected to increase by 13-15%.

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.