Geopolitical Crisis Hits India Aviation Sector as Passenger Traffic Declines

New Delhi, May 29: India’s domestic air passenger traffic declined by 2 per cent year-on-year in April 2026 as geopolitical tensions, rising operational costs and disruptions in international airspace availability weighed on the aviation sector, according to a report released by ICRA on Friday.

The report stated that domestic airlines carried 140.8 lakh passengers in April 2026 compared to 143.1 lakh passengers during the same month last year. Passenger traffic also recorded a sequential decline of 2 per cent from 143.7 lakh passengers reported in March 2026.

ICRA noted that airline capacity deployment during April 2026 fell by 0.6 per cent compared to the corresponding period last year and declined by 1.4 per cent against the previous month, reflecting reduced operational activity across the sector.

The report highlighted that the Indian aviation industry is facing mounting pressure from multiple external factors, including higher aviation turbine fuel prices, depreciation of the Indian rupee against the US dollar and disruptions linked to escalating geopolitical conflict in West Asia.

For the financial year 2025-26, domestic passenger traffic reached 1,677.4 lakh passengers, registering a marginal growth of 1.4 per cent year-on-year. The growth remained within ICRA’s projected range of 0 to 3 per cent for the sector.

International passenger traffic for Indian carriers also recorded slower-than-expected expansion during FY2026. According to the report, international passenger movement grew by 3.9 per cent to 350 lakh passengers, lower than ICRA’s earlier growth estimate of 7 to 9 per cent.

The agency had revised its outlook on the Indian aviation sector from “Stable” to “Negative” in March 2026, citing expected weakening of profitability due to rising fuel expenses and operational disruptions triggered by geopolitical instability in West Asia.

ICRA warned that continued airspace closures, flight cancellations and rising ticket prices due to fuel surcharges could further affect passenger demand in the coming months. The report also stated that the removal of airfare caps by the Directorate General of Civil Aviation, introduced earlier in December 2025, may lead to increased fare volatility if airlines raise ticket prices significantly.

The report further observed that some airlines have already started reducing international operations because of demand disruptions and increasing operational costs associated with the ongoing West Asia conflict.

According to ICRA, the reduction in international operations could reverse the increase in international seat capacity share recorded during FY2026.

The report reflects growing concerns within India’s aviation sector as airlines continue to navigate economic pressure, fluctuating passenger demand and geopolitical uncertainties impacting both domestic and international travel operations.