Domestic airlines in India are projected to incur net losses of Rs 36,000-38,000 crore in the financial year 2026-27 (FY27), driven by the depreciation of the Indian rupee and escalating operational costs, according to a latest report by credit rating agency ICRA.
Losses likely to widen further
The Indian aviation industry is estimated to have reported a net loss of Rs 32,000-34,000 crore in FY2026, which is significantly higher than ICRA's earlier estimates of Rs 17,000-18,000 crore. The sharp revision reflects the adverse impact of a weaker rupee and higher fuel and maintenance costs.
According to ICRA, the rupee depreciation has increased the cost of aircraft leases and foreign currency-denominated debt, while jet fuel prices remain elevated. Additionally, supply chain disruptions have led to higher maintenance expenses for aging fleets.
Key factors behind the losses
ICRA attributed the widening losses to several factors: the Indian rupee has depreciated by around 8% against the US dollar in the past year, directly increasing costs for airlines that pay for aircraft leases and spare parts in dollars. Furthermore, aviation turbine fuel (ATF) prices have remained high, accounting for nearly 40% of an airline's operating costs.
"The combination of a weak rupee and high ATF prices has put immense pressure on the financial health of Indian carriers," said an ICRA spokesperson. "While passenger demand has recovered, the cost environment remains challenging."
Impact on carriers and outlook
The losses are expected to be widespread, affecting both full-service and low-cost carriers. Some airlines have already reported record losses in recent quarters. ICRA noted that unless there is a significant reduction in fuel prices or a strengthening of the rupee, the financial stress will persist.
However, passenger traffic is expected to grow by 8-10% in FY27, which could provide some revenue relief. But given the high fixed costs, the industry may take longer to return to profitability.
