India’s Plane Project: FY26 has turned out to be one of the toughest years for Indian aviation. A deadly Air India crash shocked the country. Cyberattacks hit airline and airport systems. Many planes had technical issues. IndiGo also faced a major operational breakdown in December.
ICRA said the problems came together at the same time. Kinjal Shah senior vice president and co-group head for corporate ratings at ICRA explained it clearly. “India’s aviation industry, which has experienced rapid growth over the past, has faced a particularly challenging FY2026, highlighted by a fatal Air India crash, cross border escalations, a notable increase in technical incidents, cyberattacks on airline and airport systems, aircraft shortages and recent operational challenges faced by Indigo in December 2025,” Shah said.
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Falling Confidence
“These issues have resulted in slower domestic air passenger traffic growth during the current fiscal and coupled with the depreciation of the INR against the US$, these have contributed to substantial net losses for airlines, thereby weakening their financial position,” Shah said.
ICRA later increased its loss estimate for FY26. In December it said airlines could lose between ₹17,000-18,000 crore. Earlier this number was ₹9,500-10,500 crore. Passenger growth was also cut down to 0-3% from the earlier 4-6%, reported ET.
More Airlines
After the IndiGo disruption many people raised concerns about depending on only a few big airlines. Civil Aviation Minister Ram Mohan Naidu said India can support more players and the government wants new airlines to enter.
“I want more players in the industry. India today has a capacity of five big airlines, and that has been an effort from the ministry to encourage more airlines,” Naidu told Parliament.
The government has already given approval to new airlines like Al Hind Air FlyExpress and Shankh Air. This shows that growth will not be limited to current big airlines. But experts warn that growth alone is not enough. Training regulation and oversight must grow at the same speed.
Bhavana Yerrumreddy partner for aviation at EY India said future aviation policy must focus on strength not just size. “As India prepares its forthcoming Union Budget, aviation policy should emphasise structural resilience alongside capacity expansion, recognising the sector’s growing economic and strategic significance,” she said.
She also added that planning must improve. “Sustained growth in passenger traffic and fleet size necessitates a shift from reactive interventions to preventive, system-level policy measures,” she said.
She stressed spending more on pilot training technical staff modern air traffic systems and local maintenance. “Budgetary allocations should prioritise strengthening pilot and technical training capacity, modernising air-traffic management infrastructure, and developing domestic maintenance, repair, and overhaul (MRO) capabilities,” Yerrumreddy said. She also called for stronger checks. “Parallel investments are required to augment regulatory capacity and institutionalise periodic independent safety evaluations, with appropriate public disclosure,” she said.
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Regional Flights
While safety issues dominate news regional connectivity remains important. Under the UDAN scheme flying was made easier for smaller towns. Over 1.56 crore passengers have used these routes. More than 3.23 lakh flights now connect 93 airports. This helped tier-2 and tier-3 cities grow faster.
ICRA expects Budget 2026 to continue this focus. “Budget 2026 is expected to reiterate the focus on improving regional connectivity through the Regional Connectivity Scheme (RCS) or Ude Desh ka Aam Nagrik (UDAN),” Shah said. He also added “The Budget is also likely to focus on setting up new airports and expanding the existing airport capacities at some key airports to help address the current airport infrastructure constraints faced by the airlines.”
Another big issue is aircraft availability, engine problems and spare part shortages have grounded many planes. This forced airlines to cancel thousands of flights. “Aircraft availability and spare-part shortages have posed significant operational and financial challenges for Indian airlines in recent years,” Shah said. “The shortage of critical spare parts and delays in engine repairs further exacerbated the issue.”
He also pointed out how taxes make repairs slow. “Tax and fiscal policy can play a pivotal role in alleviating these challenges,” Shah said. “High customs duties and taxes on imported aircraft parts and maintenance services increase costs and prolong turnaround times for repairs. Streamlining customs procedures and rationalising taxes on maintenance, repair, and overhaul (MRO) activities would facilitate quicker access to spare parts.”
Fuel costs also hurt airlines badly. ATF makes up 30-40% of airline expenses. State taxes make it even costlier. “The state VAT imposed on aviation turbine fuel (ATF) in India is considerably higher than the rates applied to leading international airlines,” Shah said. “With ATF accounting for 30-40% of the cost of airlines, the airline industry has been wishing for rationalising of the taxes on ATF.”
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India’s Dream to Build Its Own Planes
Apart from fixing problems India is also dreaming big. Civil Aviation Minister Ram Mohan Naidu said India wants to build its own commercial aircraft. Speaking at Davos he confirmed partnerships with Russia and others.
“Yes,” Naidu said when asked whether India is building a plane with the Russians and the Sukhoi Superjet. “I’m saying 1,700 planes, all these planes are coming from outside. We have to either buy from Airbus, or buy from Boeing. Why can’t we build our own plane?” reported NDTV.
He said Russia is sharing technology with HAL and Adani has partnered with Brazil’s Embraer. “It is going to work out”.
“Very soon we are going to announce the assembly line of them in India also,” Naidu said. “It’s going to be a great addition.”
He encouraged Indian companies to invest more. “The ultimate objective is to, from scratch, make our own plane,” he said. He also spoke about helicopters. “I think within two more months we will have the first helicopter which has been manufactured in India, certified for civil operations.”
He added that helicopters under UDAN are expanding fast. “We separated it. We said helicopters need to have their own directorate,” he said. Talking about new flight routes he said “Can we have another station, another hub in Gujarat via Dholera, Rajkot and reroute the planes via that station?” and added “We are exploring options, higher up into the Himalayas, across China.”
Naidu summed it up clearly. “See, main focus becomes upon the travel. But civil aviation contains many more modules. One important thing that I want to concentrate upon is the manufacturing sector.”
