Indian airlines to see 11–14% profit moderation in FY26

New Delhi: India’s domestic airline industry is projected to see operating profits ease by 11–14% in FY26, reaching ₹20,000–21,000 crore, down from approximately ₹23,500 crore in FY25, according to a Crisil Ratings analysis.

Weaker demand in the first quarter—triggered by disruptions like airport closures due to border tensions and an aircraft mishap in June that heightened safety checks—slowed passenger traffic growth to 5.2%, compared to 7.1% year-on-year in the same period last year.

Despite the sluggish start, a stronger second half is forecast, with overall passenger growth in FY26 expected to rebound to 7–9%, aligning closely with the 8.1% seen in the previous fiscal.

However, profitability pressures persist. Passenger yields are likely to decline 2–4%, following a 3% increase last year. Additional costs—stemming from flight rerouting and operational constraints—will further weigh on margins, though these could be eased somewhat by an anticipated 8–10% drop in fuel costs.

While operating profit may moderate in FY26, Crisil notes that airlines’ credit profiles are likely to remain resilient, bolstered by healthy liquidity and planned equity infusions.