India’s domestic air traffic slips 2% in April as higher fares, fuel costs cloud aviation outlook: ICRA

India’s aviation sector has entered FY2027 on a subdued note, with domestic passenger traffic declining both year-on-year and sequentially in April, signalling a moderation in travel demand amid elevated airfares and mounting cost pressures.

According to rating agency ICRA, domestic air passenger traffic stood at an estimated 140.8 lakh in April 2026, down 1.6% from 143.1 lakh in the corresponding month last year and 2.0% lower than 143.7 lakh recorded in March 2026.

The decline comes after domestic traffic growth remained muted through FY2026, when passenger volumes rose just 1.4% to 1,677.4 lakh, broadly in line with ICRA’s expectations.

Capacity cuts mirror softer demand

The slowdown in passenger growth was accompanied by a reduction in airline capacity deployment. Domestic carriers operated around 97,598 departures during April, 0.6% lower than a year earlier and 1.4% below March levels.

Despite the moderation in traffic, Passenger Load Factors (PLFs) remained healthy at an estimated 85.9%, though lower than 86.8% recorded a year ago.

ICRA attributed the weakness partly to softer discretionary travel demand as airfares remained elevated. The agency noted that flight cancellations, geopolitical disruptions and higher operating costs have begun weighing on the industry's growth trajectory.

 Domestic traffic growth in FY2026 remained significantly below the double-digit expansion witnessed in previous years.

International growth also misses expectations

International passenger traffic carried by Indian airlines grew 3.9% to 350 lakh passengers in FY2026, falling short of ICRA’s earlier expectation of 7-9% growth. The rating agency said its projections were drawn before the escalation of geopolitical tensions in West Asia, which subsequently disrupted operations and increased costs for airlines.

ICRA has already revised its outlook on the aviation sector to “Negative”, citing pressure on airline profitability from higher fuel prices, currency depreciation and disruptions to international airspace. The agency believes passenger traffic forecasts for FY2027 now carry a downside risk if airfares rise sharply or geopolitical uncertainties persist.

Fuel costs emerge as a key concern

Aviation turbine fuel (ATF), one of the largest components of airline operating costs, continues to remain a major concern. ATF prices announced on May 1 were unchanged from April levels but were 23.5% higher than a year ago, following sharp increases in recent months triggered by the West Asia conflict. While average ATF prices in FY2026 were still 4.1% lower than FY2025 levels, the recent surge in crude oil prices threatens to reverse that trend.

With fuel accounting for 30-40% of airline operating expenses and a significant portion of costs denominated in US dollars, airlines remain exposed to both crude price volatility and currency movements. Against this backdrop, ICRA expects the industry's financial performance to remain under pressure even as passenger demand gradually recovers.