India's Aviation Sector Soars with Robust Growth Projections

A report by CareEdge predicts that India's passenger air traffic will grow at a 9% CAGR from FY25 to FY27. International traffic is set to lead this growth, supported by new wide-body aircraft. Significant investments in airport infrastructure are also projected, bolstering both aeronautical and non-aeronautical revenues.

India's aviation sector is poised for substantial growth, with air passenger traffic projected to rise at a compounded annual growth rate (CAGR) of 9% from FY25 to FY27, according to a report by CareEdge Ratings. By FY27, the number of air passengers is expected to reach approximately 485 million.

International air traffic is likely to surpass domestic growth, bolstered by the integration of wide-body aircraft into domestic fleets beginning FY26. The report, examining the financial performance of 11 major private Indian airports, highlights that between FY21 and the initial months of FY25, airport operators, including the Airports Authority of India (AAI), invested about Rs 80,000 crore in capital expenditure. Notably, 42% of this spending supported the development of greenfield airports at four different locations.

Future financial commitments include a Rs 1.1 lakh crore capex plan through FY26 to FY30, primarily driven by brownfield expansions. This investment is expected to foster a 42% CAGR in aero revenue from FY24 to FY27, while non-aero revenue could see a growth rate between 12-14%. The sector has experienced a robust recovery, with passenger traffic surpassing pre-COVID levels by 1.10 times in FY24.

Despite domestic travel rebounding by FY23, international travel's recovery was realized by FY24, exceeding pre-pandemic levels by 1.04 times. The Mahakumbh festival in Q4 FY25 is anticipated to mitigate low passenger growth during the remaining period of FY25.

The report projects a capital expenditure increase of Rs 30,000 crore during FY26-FY30, totaling approximately Rs 1.1 lakh crore, with 18% directed towards city-side development and non-aeronautical advances. This reflects a strategic focus on enhancing commercial infrastructure and ancillary services.

Domestic passenger traffic is expected to continue its upward trend, spearheaded by brownfield airport expansions, generating funding opportunities worth Rs 75,000 crore. Additionally, two new greenfield airports, with an estimated project cost of Rs 25,000 crore, are anticipated to commence operations in the first half of FY26.

(With inputs from agencies.)