India's aviation sector is poised for strong growth in FY26, with ICRA projecting an 18-20% YoY increase in revenue for airport operators. This growth is driven by a combination of factors including a steady rise in passenger traffic, tariff hikes, and a substantial increase in non-aeronautical revenues. According to ICRA's estimates, the overall passenger traffic (domestic and international) is expected to grow at a healthy 7-9% YoY and reach approximately 440-450 million passengers in FY26. This is an extension of the growth seen in FY25, where international traffic grew by 11% and domestic traffic increased by 9%, resulting in a total of 412-415 million passengers.

Factors Driving Growth

The growth of India’s aviation sector is being fueled by a strong recovery in domestic and international travel, particularly in the wake of the pandemic. The international passenger traffic continues to lead, driven by rising tourism, greater connectivity to new destinations, and an increasing number of global travelers choosing India as a key destination. International traffic is expected to grow at a 7-11% YoY pace in FY26, while domestic traffic is estimated to grow at a slightly slower rate of 6-8% YoY.

At the same time, the airports are benefiting from higher tariffs, which have contributed to improved revenue generation. This, combined with the expansion of non-aeronautical revenues such as retail, advertising, and parking, has resulted in a robust financial outlook for the airport operators. According to ICRA’s estimates, the revenues of the sample airports analyzed are projected to grow by an impressive 18-20% YoY in FY26, aided by healthy profitability margins and comfortable liquidity positions.

Substantial Investments in Airport Infrastructure

The aviation sector is also undergoing massive investments, with more than Rs. 1,00,000 crore (US$ 11.61 billion) expected to be invested in the airport infrastructure over the next four to five years. This includes both greenfield projects (new airports) and brownfield expansions (upgrades to existing airports) to address capacity constraints at several airports. Notable greenfield airport projects include the Jewar Airport (Noida), Navi Mumbai Airport, Bhogapuram (Andhra Pradesh), and Parandur (Chennai).

Furthermore, brownfield expansions are being planned for key airports in Bangalore, Hyderabad, Cochin, Mumbai, and Nagpur, which will help alleviate congestion and improve operational efficiency. These infrastructure developments are vital to accommodate the growing passenger traffic and meet future demand.

Airport Operators’ Profitability Outlook

Despite the heavy investments, the airport sector is expected to remain profitable and financially strong, supported by the increased passenger traffic and higher tariff collections. The major airport operators, including those managed by the Airports Authority of India (AAI) and under the public-private partnership (PPP) model, are expected to benefit significantly from these developments, positioning them for robust growth in FY26.

Sustained Growth Momentum

ICRA's positive outlook for the airport sector in FY26 comes at a time when the aviation industry globally is recovering from the impact of COVID-19, with India being one of the fastest-growing aviation markets in the world. The Indian aviation sector’s growth trajectory seems well-positioned to sustain momentum in the coming years, as the country continues to benefit from strong domestic demand and growing international connectivity.

The outlook for FY26 remains optimistic, and ICRA’s projections suggest that the Indian airport operators will maintain a strong growth trajectory, driven by continued passenger demand, airport upgrades, and sustained investments in infrastructure.

Conclusion

India's aviation sector is on track for a strong FY26, with a projected 18-20% revenue growth for airport operators. Supported by rising passenger traffic, tariff hikes, and substantial non-aeronautical revenue growth, the sector is expected to continue on its growth path. With over Rs. 1,00,000 crore (US$ 11.61 billion) in investments and expanding infrastructure, India is reinforcing its position as a key global player in the aviation industry. This growth not only promises improved airport facilities but also indicates a broader positive outlook for India's economy as a whole.

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