The domestic airline industry is expected to witness an operating profit of 11-14% to ₹20,000-21,000 crore this fiscal (FY26), a report stated on Thursday.
The second half of this fiscal, which typically accounts for 50-55% of annual traffic, is expected to see faster growth, Crisil Ratings said in its report.
However, this fiscal year, the growth is expected to remain moderate compared to ₹23,500 crore in the last fiscal year, due to muted demand in the first quarter and an anticipated decline in yields, the report stated.
This contrasts with the strong recovery seen in the three fiscal years post the Covid pandemic.
According to the report, driven by lower operating profit, debt metrics of airlines will moderate this fiscal; however, overall credit profiles will remain stable, driven by healthy liquidity and planned equity infusion by some airlines.
In the first quarter of this fiscal year, the industry faced two disruptions. One, tensions along India’s western border led to the closure of operations at several airports for a week, with the ensuing airspace restrictions resulting in the rerouting of international flights and longer flying times.
“Two, a major aircraft mishap in June weakened demand sentiment and prompted the impacted airline to announce capacity reductions amid heightened safety checks,” the report highlighted.
These headwinds led to softer demand and lower capacity deployment, resulting in passenger traffic growth slowing to 5.2% on-year in the first quarter, compared with 7.1% in the corresponding quarter last fiscal.
However, the second half of FY26 may see faster growth, as disruptions gradually ease, leading to a traffic growth of 7-9% for this fiscal, in line with the 8.1% growth last fiscal, the report mentioned.
“Despite steady traffic growth, sustaining the passenger load factor will come at a cost — that of a moderation in yields — this fiscal, predominantly because of subdued demand in the first quarter,” said Gautam Shahi, Director, Crisil Ratings.
Passenger yield is expected to correct by 2-4%, following a 3% increase last fiscal year, he added.
Additional costs associated with the rerouting of flights because of airspace restrictions would also have a bearing on the operating profitability of airlines.
(IANS)
