The Indian aviation industry is facing persistent challenges, including engine recalls and supply chain disruptions, according to a recent report by credit rating agency ICRA. These issues have significantly impacted the operational capacity of domestic carriers, leading to higher costs and operational delays.
Grounding of Aircraft
As of March 2025, approximately 133 aircraft across Indian carriers were grounded, accounting for nearly 16% of the commercial fleet. This grounding is primarily attributed to issues with Pratt & Whitney (P&W) engines supplied to various airlines. For instance, Go Airlines (India) Limited grounded nearly half of its fleet in FY2024 due to faulty engines, leading to its liquidation in January 2025. Similarly, InterGlobe Aviation Limited (IndiGo) had around 60-70 aircraft grounded as of January 30, 2025, due to engine-related issues, including contamination in engine parts.
Impact on Operational Capacity
The grounding of aircraft has resulted in a significant reduction in the industry's capacity, as measured by Available Seat Kilometres (ASKMs). This decline has been exacerbated by global recalls of P&W engines and delays in testing by the manufacturer. Airlines have been forced to lease additional aircraft, often older models, to compensate for the grounded fleet. This has increased lease rentals, operating costs, and reduced fuel efficiency.
Financial Outlook
Despite healthy domestic passenger traffic, the industry is projected to incur net losses of ₹20,000–30,000 crore in FY2025 and FY2026. This is a stark contrast to the net profit of ₹16,000 crore reported in FY2023–24. The losses are attributed to increased operating costs, including elevated aviation turbine fuel (ATF) prices and higher lease rentals, as well as reduced operational efficiency.
Staff Shortages
In addition to technical and financial challenges, airlines are also facing staffing shortages, particularly among pilots and cabin crew. This has led to frequent flight delays and cancellations, further affecting capacity and causing inconvenience to passengers.
Outlook for FY2026
While the industry is expected to continue facing challenges in the short term, a modest recovery is projected for FY2026. The outlook remains stable, driven by expectations of moderate growth in domestic air passenger traffic and a relatively stable cost environment. However, the pace of recovery is likely to be gradual due to the high fixed-cost nature of the business.
In conclusion, the Indian aviation sector is navigating through a turbulent phase marked by engine-related issues, supply chain disruptions, and financial losses. Addressing these challenges will require coordinated efforts from airlines, manufacturers, and regulatory authorities to ensure the industry's long-term sustainability.
