Airlines may face turbulence on weak demand, rising costs

Costlier fuel, tight capacity and softening domestic air travel to weigh down Q2 numbers

- Abhishek Law

Domestic passenger traffic fell 3% y-o-y in July and 1.4% in August, with Q2 FY26 domestic traffic down 9% to 12.6 million.

India's aviation sector is headed for a challenging second quarter (Q2FY26), as softening domestic demand, higher fuel prices, and tighter capacity weigh on airlines’ post-covid recovery, according to brokerage reports and data from Directorate General of Civil Aviation (DGCA).

The slowdown is most visible in the domestic segment, which accounts for nearly 80% of total air traffic. Domestic passenger traffic fell 3% year-on-year in July to 12.61 million. This was accompanied by a 0.81% overall flight cancellation rate in the month.

The decline is partly attributed to the fatal Air India crash in June, resulting in reduced capacity and a loss of market share for Tata Group firms. August passenger traffic stood at 12.9 million, a 1.4% decrease from the same period last year, according to DGCA data.