India’s aviation sector is projected to continue growing in FY2026, with domestic air passenger traffic expected to rise by 7–10% year-on-year, reaching between 175 and 181 million passengers, according to a report by ICRA. This projection follows a 7.6% increase in FY2025, when domestic traffic touched 165.4 million, marking a strong recovery at 16.8% above pre-pandemic levels recorded in FY2020.However, despite the steady growth in passenger numbers, the industry is likely to remain in the red. ICRA estimates a net loss of Rs 20,000–30,000 crore in FY2026, in line with the losses expected for FY2025. This is a sharp contrast to the Rs 1,600 crore net profit posted in FY2024, said ANI citing the report.According to the report, continued financial strain is being driven by elevated operating costs, including high aviation turbine fuel (ATF) prices and increasing lease obligations tied to new aircraft acquisitions. While the interest coverage ratio—a measure of a company’s ability to meet interest payments—is forecast to improve to between 1.5 and 2.0 times, it still reflects a cautious outlook.On the international front, Indian airlines are also projected to see strong growth. International passenger traffic is expected to increase by 15–20% in FY2026. In FY2025, Indian carriers flew 33.86 million international passengers, a 14.1% rise over the previous year and nearly 49% higher than the FY2020 figure.Recent monthly data supports this growth trend. Domestic air travel in May 2025 was estimated at 14.36 million passengers, representing a 4.1% increase over May 2024. However, traffic remained largely stable compared to April 2025. Airlines also expanded capacity by 5.1% year-on-year during the month.Despite positive trends in traffic and capacity, ICRA cautioned that profitability will remain under pressure. Persistent high fixed costs, elevated fuel prices, and increased interest expenses from aircraft leasing are expected to weigh heavily on financial performance. Additionally, carriers may face pressure on yields as they work to sustain high passenger load factors amid rising operating costs.