Aviation body projects Rs 170 bn loss in FY26
India’s aviation sector is facing a period of heightened financial strain, with ratings agency ICRA revising its outlook on the industry to Negative from Stable, citing rising fuel costs, a weakening rupee and demand risks linked to the ongoing West Asia conflict.
In a recent note, the agency warned that a sharp increase in crude oil prices and disruptions to international airspace since February 28, were converging to pressure airline balance sheets. ICRA had earlier flagged that escalating geopolitical tensions could push up aviation turbine fuel (ATF) prices and dent profitability — a risk it now says has materialised.
Brent crude has climbed to around $105 per barrel as of March 26, up from nearly $72 earlier, directly inflating operating costs. ATF prices have risen 5.7 per cent sequentially as of March 1 and 1.7 per cent year-on-year, reversing the softer trend seen through most of the financial year. Fuel accounts for 30–40 per cent of airline operating expenses, leaving carriers particularly vulnerable to such spikes.
Financial stress across the sector remains elevated. ICRA expects the industry to post net losses of Rs 170–180 billion in FY2026, while earlier projections of losses narrowing in FY2027 now carry a downward bias. Currency depreciation is adding to the pressure, as 35–50 per cent of airline costs — including aircraft leases, maintenance and part of fuel expenses — are denominated in US dollars.
The removal of airfare caps by the Directorate General of Civil Aviation is also seen as a potential demand risk. Higher ticket prices, the agency cautioned, could dampen passenger traffic at a time when airlines are already grappling with cost volatility.
