India's air travel market is experiencing turbulence. What's causing it?
Domestic air traffic growth has declined for three straight months, signalling cooling demand after a sharp post-covid rebound.
India’s domestic air travel market, once the face of a sharp post-pandemic rebound, is beginning to show signs of fatigue. Data from the Directorate General of Civil Aviation (DGCA) reveals that domestic passenger traffic has declined for three consecutive months through September 2025, marking the first sustained slowdown since 2022.
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%).
The recent decline risks reversing the post-pandemic boom that Indian airlines witnessed. A Mint analysis of the DGCA data shows that domestic air passenger volumes were significantly higher than pre-pandemic levels of 2019, but the decline in recent months has pulled them close to the levels seen in 2023. If this trend continues, the Indian airline industry could see its first major setback since the covid period.
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. “However, we anticipate a rebound in the second half of 2025-26, driven by increased demand for festive and leisure travel during the seasonally stronger period," he added.
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. After a three-month slide, October 2025 saw traffic increase by 4.5% (per preliminary data), pointing to a possible reversal in the trend. Icra 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. However, this will still mark the slowest pace of growth in the post-pandemic period. Ends
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