India's domestic aviation sector showed mixed signals in November 2025, with passenger traffic registering healthy month-on-month growth even as ratings agency ICRA significantly revised down its annual growth projections and loss estimates for the industry. The latest data reveals both operational resilience and underlying structural challenges facing the sector.

November Traffic Performance Shows Recovery

Domestic air passenger traffic rose to an estimated 154.5 lakh in November 2025, marking an 8.4% year-on-year increase and a robust 10.1% sequential rise from October's 140 lakh passengers. The growth was supported by stable capacity deployment, with airlines maintaining capacity levels 4.6% higher than the previous year and largely flat compared to October 2025.

For international operations, Indian carriers transported 29.9 lakh passengers in October 2025, registering 8.3% year-on-year growth and 6.0% increase over September. Cumulatively, international passenger traffic reached 205.5 lakh during the first seven months of FY26, up 9.0% year-on-year.

ICRA Revises Growth Forecasts Downward

Despite the positive November numbers, ICRA has significantly revised its domestic air passenger traffic growth forecast for FY26 to 0-3%, down from its earlier estimate of 4-6%. The revision reflects slower-than-expected traffic growth during the April-November period, with cumulative domestic traffic standing at 1,096.5 lakh passengers, reflecting modest 2.2% year-on-year growth.

The agency has also cut its international passenger traffic growth forecast for FY26 to 7-9% from the earlier projection of 13-15%. However, ICRA projects growth to recover to 6-8% in FY27, though on a lower base than earlier anticipated.

Operational Disruptions Impact Industry Sentiment

Several factors contributed to the downward revision of traffic projections. The June 2025 aircraft accident temporarily dampened travel sentiment, while cross-border escalations led to flight disruptions earlier in the year. Business travel faced pressure from US tariff-related headwinds, and IndiGo's flight cancellations in early December 2025 resulted in approximately 4,500 cancelled flights.

While the IndiGo cancellations accounted for only about 0.4% of total annual industry departures, ICRA noted that the episode is expected to weigh on passenger sentiment in the near term.

Cost Pressures Intensify Loss Projections

Cost pressures remain elevated, with aviation turbine fuel (ATF) prices rising 8.5% year-on-year and 5.3% sequentially in December 2025. After remaining lower on average in FY25, fuel prices have risen consistently on both year-on-year and month-on-month basis since October 2025, adding to airline profitability challenges.

Reflecting these operational and cost pressures, ICRA expects the Indian aviation industry to post a net loss of ₹170-180 billion in FY26, significantly higher than its earlier estimate of ₹95-105 billion. Despite the challenges, the agency has maintained a Stable outlook on the aviation sector, expecting the current disruptions to be temporary.

The Ministry of Civil Aviation has granted No Objection Certificates (NOCs) to three new airlines in 2024 - Al Hind Air, FlyExpress, and Shankh Air - in a strategic move to introduce more competition in India's highly concentrated aviation sector. However, securing an NOC is only the first regulatory step, and the reality on the ground reveals significant challenges that prevent these airlines from actually taking to the skies.

New Airlines Approved But Non-Operational

Civil Aviation Minister Ram Mohan Naidu announced the approvals following recent meetings with teams from the aspiring airlines. The three new carriers represent a diversification effort in India's aviation landscape, where InterGlobe Aviation and the Air India Group together control 90.00% of the domestic market.

Despite the government approvals, all three airlines remain non-operational. While these startups initially targeted a launch around mid-2025, none has a confirmed timeline to begin commercial operations due to substantial operational and financial hurdles.

The Aircraft Leasing Roadblock

The primary challenge facing these new airlines is aircraft acquisition, which requires significant upfront capital and regulatory clearances. To actually launch operations, airlines need two critical requirements beyond the NOC: aircraft and an Air Operator Permit (AOP) from the Directorate General of Civil Aviation.

According to a startup airline promoter, aircraft lessors are demanding around ₹100.00 crore as security deposit and proof of nearly ₹500.00 crore in bank guarantees. For startups without an operating history, raising that level of capital upfront is extremely difficult, leading them to seek government backing or support to enhance credibility with global lessors.

Market Concentration Concerns Persist

The push for new airlines addresses growing concerns about market concentration in India's domestic aviation sector. IndiGo alone holds 65.60% market share, carrying over 91.00 lakh passengers, while Air India Group controls 25.70% with 36.00 lakh passengers. SpiceJet, the third major carrier, holds a distant 2.60% market share with only 3.62 lakh passengers.

Lessor Wariness After Go First Bankruptcy

The caution among aircraft lessors stems from recent history, particularly the Go First bankruptcy case. During Go First's bankruptcy proceedings, aircraft lessors were locked in prolonged legal battles with banks and other stakeholders, as planes could not be repossessed due to pending airline dues. This episode has reinforced the perception that leasing aircraft to Indian airlines carries heightened legal and financial risk, especially for startups.

While the government's intent to encourage more airlines is clear through NOC approvals, the challenges facing new entrants remain structural. India does not lack aspiring airlines, but it faces a shortage of aircraft access, capital, and lessor confidence. Until these fundamental issues are addressed, an NOC remains just a document rather than a takeoff clearance, highlighting the gap between regulatory approval and operational reality in India's aviation sector.