India aviation growth slows: FY26 domestic traffic up just 1.4% as ATF costs surge 18%: ICRA

Domestic air passenger traffic growth remained subdued in March 2026, capping a muted fiscal for India’s aviation sector, according to ICRA. Traffic stood at 146.8 lakh passengers during the month, marking a marginal 1.0% year-on-year (YoY) increase compared with 145.4 lakh in March 2025, though rising 4.4% sequentially from February levels.

For the full financial year FY2026, domestic passenger traffic reached 1,677.4 lakh, registering a modest YoY growth of 1.4%, broadly in line with ICRA’s earlier projection of 0–3% expansion. The tepid growth underscores a stabilisation phase after the strong post-pandemic recovery seen in previous years.

Capacity discipline, high load factors support operations
Airlines maintained tight capacity deployment during the month, which was 3.0% lower than March 2025 but 10.6% higher on a month-on-month basis, partly due to fewer days in February. Despite slower traffic growth, passenger load factor (PLF) remained robust at 89.5% in March 2026, improving from 86.0% a year ago and 89.3% in February, indicating efficient capacity utilisation by carriers.

On the international front, traffic trends were mixed. Indian carriers handled 28.5 lakh passengers in February 2026, reflecting a 0.3% YoY dip and a sharp 16.0% sequential decline. However, for the eleven-month period of FY2026 (April–February), international passenger traffic rose 7.7% YoY to 331.5 lakh, suggesting relatively stronger outbound and long-haul demand compared to the domestic segment.

Fuel price surge, currency pressure remain key risks
The sector continues to grapple with cost pressures, particularly aviation turbine fuel (ATF) prices. As of April 1, 2026, ATF prices rose 9.2% sequentially and 18.2% YoY, driven by elevated crude oil prices amid the West Asian geopolitical conflict. Crude prices alone surged 45.5% month-on-month in March, although the pass-through to ATF was relatively moderated.

Government intervention provided partial relief, with the Ministry of Civil Aviation capping monthly ATF price hikes and oil marketing companies limiting the increase to 9.2%. Additionally, a 25% reduction in landing and parking charges for domestic airlines for three months starting April 2026 is expected to ease cost burdens.

However, persistently high crude prices and a weakening Indian rupee against the US dollar remain key concerns, with the potential to exert further pressure on airline profitability in the coming quarters.