The Indian aviation industry is projected to report a net loss of about Rs 2,000-3,000 crore in fiscal 2025 and 2026, nearly double the loss of Rs 1,000 crore it faced in the last financial year, according to ICRA. However, this estimate is lower than ICRA's earlier projection of a Rs 3,000-4,000 crore loss for the same period.
Supply-chain challenges and engine failure issues have significantly impacted industry capacity over the last 18 months and are expected to continue affecting it in the current year, the report said. Specifically, the industry has faced issues with the Pratt and Whitney (P&W) engines supplied to various airlines.
Go Airlines (India) Ltd. grounded half of its fleet in fiscal 2024 due to faulty P&W engines, effectively stalling operations. IndiGo operator InterGlobe Aviation Ltd. also grounded over 70 aircraft due to P&W engine problems, including contamination of powder metal used in certain engine parts. About 134 aircraft, representing 15-17% of the total industry fleet, remained grounded as of June 30, 2024.
Given the global recall of these engines by P&W and other issues with original equipment manufacturers, testing and resolution by P&W are expected to take 250-300 days. This delay is likely to increase operating expenses for airlines due to the cost of grounding, higher lease rentals for additional aircraft leased to offset grounded capacity, rising lease rates, and lower fuel efficiency caused by older aircraft taken on short-term leases.
These factors are expected to adversely impact airlines’ cost structures, ICRA said. However, healthy yields, high passenger load factors, and partial compensation from engine OEMs may help absorb some of the impact, the report said.
Additionally, in the current fiscal year, the industry has been grappling with shortages of pilots and cabin crew, leading to several flight cancellations and delays, further affecting capacity availability and contributing to customer grievances.
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