ICRA lowers India's FY2026 Airport passenger growth forecast amid geopolitical and supply chain issues
MUMBAI: The credit rating agency ICRA has revised its growth projection for overall airport passenger traffic in India for the fiscal year 2026 (FY2026), citing geopolitical tensions and reduced aircraft availability following a fatal crash in June 2025.
ICRA now forecasts overall passenger traffic growth to moderate to 5%–7% year-on-year, reaching 430–440 million, down from its earlier estimate of 7%–9%. This follows an expansion of approximately 9% to 412 million in FY2025 and is projected to be the lowest post-Covid growth rate.
The downward revision reflects a modest 3% rise in passenger traffic to 170 million during the first five months of FY2026, which was below the agency's initial expectations. The lack of available aircraft, compounded by fleet inspections, was a key factor compressing growth.
International Travel Remains Key Driver
Despite the overall slowdown, international travel is expected to outperform domestic segments.
Domestic passenger traffic growth is projected to moderate to 4%–6%, reaching 348–355 million in FY2026, consistent with the slower 2.6% growth registered in the first five months of the fiscal year. Conversely, international passenger traffic is likely to see a healthier growth of 7%–10%, reaching around 82–85 million.
"International traffic continues to outpace domestic traffic growth, driven by healthy international tourism activity, along with improved connectivity to newer destinations," said Vinay Kumar G, Sector Head, Corporate Ratings, ICRA. "The healthy rise in international traffic will augur well for the airport sector, given that it is relatively more remunerative than domestic traffic."
Cargo Growth Eases as Trade Dynamics Shift
ICRA also revised the overall air cargo volume growth, expecting it to ease to 4%–6% in FY2026 from a 10% growth rate in FY2025. This moderation is attributed to an expected slowdown in international cargo volumes due to the high base effect from the Red Sea crisis and ongoing US trade war uncertainties.
The Red Sea crisis had previously caused a significant surge in international air cargo, with volumes expanding by 13.6% in FY2025. For the current fiscal year, international cargo volume growth is projected to slow to 2%–4%, while domestic cargo volumes are expected to pick up pace, growing by5%7% and supporting the overall market.
Healthy Financials and Major Capex Plans
The financial outlook for airport operators remains robust. Kumar noted that the revenues of ICRA’s sample set companies are likely to increase by 7%–8% in FY2026, or even higher at 15%–16% when adjusted for one-time income in FY2025. This increase is driven by a substantial rise in aeronautical tariffs at Delhi International Airport, increased traffic, and a ramp-up in non-aeronautical revenues.
Operating margins are projected to remain healthy at around 51%–52% during FY2026-FY2027.
The sector is set for a substantial capital expenditure cycle, with investments exceeding Rs 1,00,000 crore planned over the next 4-5 years. This includes the development of new greenfield airports in locations like Jewar (Noida) and Navi Mumbai, as well as brownfield expansions at key existing hubs.
Kumar concluded that while interest expenses are expected to increase as capital projects are completed, the credit profile of airport operators is projected to remain stable, supported by healthy accruals and comfortable liquidity.
ICRA now forecasts overall passenger traffic growth to moderate to 5%–7% year-on-year, reaching 430–440 million, down from its earlier estimate of 7%–9%. This follows an expansion of approximately 9% to 412 million in FY2025 and is projected to be the lowest post-Covid growth rate.
The downward revision reflects a modest 3% rise in passenger traffic to 170 million during the first five months of FY2026, which was below the agency's initial expectations. The lack of available aircraft, compounded by fleet inspections, was a key factor compressing growth.
International Travel Remains Key Driver
Despite the overall slowdown, international travel is expected to outperform domestic segments.
Domestic passenger traffic growth is projected to moderate to 4%–6%, reaching 348–355 million in FY2026, consistent with the slower 2.6% growth registered in the first five months of the fiscal year. Conversely, international passenger traffic is likely to see a healthier growth of 7%–10%, reaching around 82–85 million.
"International traffic continues to outpace domestic traffic growth, driven by healthy international tourism activity, along with improved connectivity to newer destinations," said Vinay Kumar G, Sector Head, Corporate Ratings, ICRA. "The healthy rise in international traffic will augur well for the airport sector, given that it is relatively more remunerative than domestic traffic."
Cargo Growth Eases as Trade Dynamics Shift
ICRA also revised the overall air cargo volume growth, expecting it to ease to 4%–6% in FY2026 from a 10% growth rate in FY2025. This moderation is attributed to an expected slowdown in international cargo volumes due to the high base effect from the Red Sea crisis and ongoing US trade war uncertainties.
The Red Sea crisis had previously caused a significant surge in international air cargo, with volumes expanding by 13.6% in FY2025. For the current fiscal year, international cargo volume growth is projected to slow to 2%–4%, while domestic cargo volumes are expected to pick up pace, growing by
Healthy Financials and Major Capex Plans
The financial outlook for airport operators remains robust. Kumar noted that the revenues of ICRA’s sample set companies are likely to increase by 7%–8% in FY2026, or even higher at 15%–16% when adjusted for one-time income in FY2025. This increase is driven by a substantial rise in aeronautical tariffs at Delhi International Airport, increased traffic, and a ramp-up in non-aeronautical revenues.
Operating margins are projected to remain healthy at around 51%–52% during FY2026-FY2027.
The sector is set for a substantial capital expenditure cycle, with investments exceeding Rs 1,00,000 crore planned over the next 4-5 years. This includes the development of new greenfield airports in locations like Jewar (Noida) and Navi Mumbai, as well as brownfield expansions at key existing hubs.
Kumar concluded that while interest expenses are expected to increase as capital projects are completed, the credit profile of airport operators is projected to remain stable, supported by healthy accruals and comfortable liquidity.
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