India’s air travel market is experiencing turbulence. What’s causing it?

After two years of recovery following the Covid slump, India’s aviation sector appears to be entering a phase of consolidation. Monthly growth that once ran into double and triple digits has now eased to single digits—and in recent months, slipped into contraction. The DGCA data shows that domestic passenger traffic growth slowed from 8.5% in April 2025 to just 1.9% in May, and then fell into negative territory in July (-2.9%), August (-1.4%), and September (-2.9%).

Even so, the industry remains on firmer footing than before the pandemic. A Mint analysis of the DGCA data shows that domestic air passenger volumes in 2025 stayed comfortably above 2019 levels, underscoring that while momentum has softened, travel demand remains structurally higher than pre-covid levels. The recent flattening, therefore, reflects a market stabilizing at a higher base rather than a reversal in demand.

The second quarter (July-September) proved particularly challenging for airlines. According to Crisil Ratings, the period was marked by cross-border tensions along India’s western border, which forced temporary airport closures and airspace restrictions, as well as a fatal aircraft accident in June, which hurt passenger confidence and led to temporary capacity cuts for additional safety checks.

“That, combined with heavy rainfall, led to a 2.4% year-on-year decline in domestic air traffic during the second quarter of FY26,” said Gautam Shahi, director at Crisil Ratings.

The weakness in India’s domestic market was mirrored globally. The International Air Transport Association (IATA) reported that worldwide passenger traffic grew 3.6% on-year in September, down from 4.6% in August. Both India (-0.7%) and the US (-1.7%), the world’s two largest domestic markets, recorded contractions in revenue passenger kilometres (RPK), which reflects the total distance flown by paying passengers and is a key indicator of travel demand.

According to Sakshi Suneja, vice-president and sector head of corporate sector ratings at Icra, the decline in RPKs was likely influenced by a mix of external and domestic factors. “The year-on-year decrease in RPKs reported by the IATA for India may have been influenced by an unusually long monsoon season and economic challenges such as US tariffs, which weakened business sentiments,” she said.

Looking ahead, analysts say India’s aviation market is entering a more measured phase after two years of catch-up growth. Preliminary estimates from the aviation ministry showed that domestic air passenger traffic rose 4.5% on-year in October 2025, ending the three-month slide. Icra now expects growth of 4-6% in 2025-26, supported by a seasonal uptick in festive and leisure travel during the second half of the year, Suneja added.