Credit rating agency ICRA projected that the net loss of the Indian aviation industry would narrow to Rs 110-120 billion (bn) in 2026-27 as the sector moved further along its recovery path. The agency indicated that steady domestic passenger demand and improved flight operations had underpinned a gradual reduction in operating deficits across carriers. It added that a combination of capacity rationalisation and revenue management measures was expected to support the narrowing of losses and that improved liquidity management would help carriers withstand volatility. ICRA observed that domestic traffic volumes had recovered significantly from the depths experienced earlier and that sustained demand for air travel was contributing to higher load factors. The assessment suggested that ancillary revenues and yield stabilisation were helping airlines improve their cash flows and operating margins. However, the agency noted that cost pressures and external shocks could still pose downside risks to profitability, including sudden spikes in input prices or adverse regulatory changes. The projection reflected trends in fleet utilisation, route rationalisation and more disciplined capacity additions by carriers, which together were moderating unit costs. ICRA emphasised that continued focus on cost efficiency, fuel procurement strategies and network optimisation would be important for further improvement, and that tighter commercial discipline could accelerate recovery timelines. The agency also highlighted the role of cargo operations and non-ticket revenues in cushioning financial performance. Market participants were advised to monitor demand patterns, fares and input cost movements closely in order to assess the sustainability of the recovery and to track consumer confidence indicators. ICRA expected that modest improvement in yields and careful capacity management could enable the sector to report smaller aggregate losses by the financial year 2026-27, provided macroeconomic conditions remained supportive over the medium term. The outlook remained contingent on macroeconomic stability and the absence of major disruptions to airline operations.