NEW DELHI: From a fatal crash to flight cancellations like never before, India’s aviation sector had one stressful 2025. The two major events, coupled with soaring jet fuel prices, an unfavourable forex rate, and geopolitical tension, especially after the Indo-Pak clash, only added to the woes of airlines and, subsequently, passengers.
The Air India crash
In one of the most tragic accidents, an Air India Boeing 787 Dreamliner carrying 242 passengers and crew crashed on June 12. Flight number AI-171, bound for London, lost altitude moments after taking off from Sardar Vallabhbhai Patel International Airport in Ahmedabad. A total of 260 people, including 241 passengers and crew members died. Only one passenger survived.
What followed after the crash was inspection of the Boeing Dreamliner aircraft, compensation to the family members of the deceased and an investigation to determine the cause. However, even after 6 months, there has been no concrete answer to many questions. An interim report by India’s Aircraft Accident Investigation Bureau (AAIB) was released in July, but critics and pilot bodies condemned it for unfairly focusing on the actions of the pilots and diverting attention away from a possible fault with the aircraft.
The preliminary report stated that the aircraft’s front enhanced airborne flight recorder revealed that the crash was caused by the loss of thrust in both engines after their fuel control switches moved from RUN to CUTOFF three seconds after liftoff. No cause for the switch movement was given in the report. The government earlier this month said that the investigation is still in progress, with a final report yet to be released.
Mass cancellation by IndiGo
An operational breakdown at IndiGo, which controls roughly two-thirds of the domestic traffic, in early December led to thousands of passengers getting stranded at airports in India. Flyers lost countless hours, suffered harrowing experiences and even spent a fortune to find an alternative option as airfares on select routes surged over 10-fold.
IndiGo cancelled more than 5,000 flights due to a severe crew shortage, especially pilots, following revised Flight Duty Time Limitations (FDTL) norms introduced last month. New regulations by the aviation regulator Directorate General of Civil Aviation (DGCA) mandated longer crew rest and fewer night landings, but IndiGo failed to hire enough staff, causing operational chaos.
The government intervened and initiated an inquiry with the aviation minister K. Rammohan Naidu stating that strict action will be taken against the operator to set an example for other airlines. Following the disruptions, DGCA directed IndiGo to reduce its winter schedule by 10% and issued show-cause notices to the airline's CEO, Pieter Elbers, and COO, Isidre Porqueras. A four-member panel that probed the massive flight disruptions at IndiGo earlier this week has submitted its report to the DGCA.
Financial Loss
India’s aviation sector is likely to suffer heavy losses in CY2025/FY2025-26. In November, Aviation Turbine Fuel (ATF) prices were up 4.4% year-on-year. With fuel accounting for 30-40% of airlines’ operating costs, sustained price escalations remain a key area of concern for the industry.
Leasing aircraft, which are tied to long-term dollar contracts, has now emerged as a tension for carriers as the rupee continues to slide. InterGlobe Aviation, IndiGo’s parent, reported a net loss of Rs 2,582 crore in Q2FY26 due to adverse currency movements on dollar-denominated obligations.
While the intensity of price wars has reduced in the industry, airlines have started taking hits due to geopolitical tensions. Air India in October informed that it has incurred losses of Rs 4,000 crore over the past few months due to restrictions on flying over Pakistan since April 2025.
The sector also continues to face supply chain bottlenecks and engine failure-related aircraft groundings, as per ratings agency ICRA. While Indian carriers reported a total net loss of Rs 924 crore in FY24, the figure widened to Rs 5,290 crore in FY2024–25. ICRA expects the industry’s financial performance to remain under pressure with the sector projected to report a wider net loss of Rs 9,500 – 10,500 in FY2026.
Passenger traffic growth is also likely to slow down. CareEdge Ratings projects passenger traffic at Indian airports to reach around 430 million in FY26, down from its earlier estimate of 445 million. This revision translates to a growth rate of 4.3%, significantly lower than the previously anticipated 8%, marking the weakest growth in a decade (excluding the pandemic years).
The positives
Despite severe turbulence, the industry also had its positive moments. IndiGo operations stabilised within weeks after the DGCA withdrew the new weekly roster norm about weekly rest for pilots. Another major milestone for IndiGo this year was launching direct flights to Europe and briefly becoming the world’s most valuable airline.
Air India, after curtailing its international operations following the crash, also expanded its reach and fleet size. The airline completed the retrofit programme for its legacy A320neo fleet.
Akasa Air raised fresh capital from investors to support future growth plans while the government gave no objection certificates (NOC) to three airlines -- Shankh Air, Al Hind Air and FlyExpress -- to increase competitiveness in the skies as two players now control 90% of the market.
The other big takeaways were India and China resuming direct flight services after a gap of more than 5 years and Mumbai Metropolitan Region getting a second airport.