- India's aviation sector shows recovery as Middle East tensions ease and May sees rising traffic
- International passenger traffic rose 24% month-on-month but remains 24% below last year
- Domestic passenger traffic grew 10% year-on-year, with load factor reaching 85.9% in May
India's aviation sector is showing signs of a gradual recovery as tensions in the Middle East ease, with flight and passenger traffic witnessing a sharp uptick in May, according to a new report. While international air travel is rebounding strongly, domestic passenger traffic continues to post steady growth reflecting a mixed but improving outlook for the sector, the Equirus Securities report said.
The report shows that budget carrier, IndiGo has emerged as the biggest winner of the international rebound, snapping up market share from Air India as it normalises its overseas network faster than its rival. Fuel costs, meanwhile, have eased sharply, giving airlines some breathing room, even as a weak rupee continues to push up costs.
Middle East Tensions Easing - What The Data Shows
The report mentions that easing geopolitical tensions in the Middle East have allowed Indian carriers to gradually restore international flight operations that had been curtailed earlier this year.
In May 2026, international passenger traffic on Indian carriers recovered sequentially to around 2.3 million, increasing 24 per cent compared to the previous month, a clear sign of operations returning to normal as airspace and routes reopen.
However, traffic remained down 24 per cent compared to a year ago, the report noted, showing the industry has some distance to travel before fully recovering from the disruption.
Flight departures on international routes tell the same story - up 22 per cent month-on-month to around 14,200, but still down 24 per cent from a year earlier.
Seating capacity (ASKs), the report said, was also scaled back sharply earlier in the year and is now being reinstated, rising 10 per cent sequentially to around 10.5 billion even as it remained 20 per cent lower than last year.
Passenger demand outpaced capacity recovery sequentially, pushing the international passenger load factor, essentially meaning how full flights are, up to around 76.6 per cent, an improvement from the previous month, though still below year-ago levels.
The Middle East-driven disruption hit international travel very hard, but as tensions ease, airlines are putting planes back in the sky, and travellers are filling those seats even faster than the seats are being added back.
Domestic Travel: Steady And Strong
While international travel dominates the recovery narrative, the data shows that domestic market never really needed one, it just kept growing.
Domestic passenger traffic increased to around 15.4 million in May, up 10 per cent from a year ago and 11 per cent from the previous month, as per the report.
Flight departures also rose 5 per cent year-on-year to around 103,500. Strong demand absorption outpaced capacity growth, the report noted, pushing the domestic load factor up to 85.9 per cent, one of the healthier readings the sector has seen recently.
The Combined Picture: Total Traffic Still Below Last Year
Add domestic and international flying together, and the overall industry picture is more modest than the domestic numbers alone suggest.
Total passengers carried by Indian carriers stood at around 17.7 million in May, up 4 per cent from a year ago and 13 per cent from the previous month, the report noted.
Total flight departures were flat year-on-year at around 117,700, but rose 8 per cent sequentially, while overall seat capacity was down 5 per cent from a year ago. The blended load factor across both segments came in at 82.5 per cent, according to the report.
This underlines that the headline recovery story is really being carried by domestic demand, the international drag is still large enough to pull down the industry's combined growth rate well below the double-digit domestic pace.
Who's Winning The Skies?
In the domestic market, the data indicates that IndiGo retained its dominant position with a domestic passenger market share of 64.8 per cent, essentially unchanged from a year ago.
Air India Group's domestic share improved sequentially to 25.7 per cent, while Akasa Air continued its gradual expansion to 5.8 per cent. SpiceJet's share moderated to 2.5 per cent.
While in the international market the shift has been dramatic. IndiGo's international passenger market share increased to 52.5 per cent, up more than 8 percentage points from a year ago, reflecting faster normalisation of its overseas network.
Air India Group's international share, by contrast, moderated to 42.5 per cent, down nearly 8 percentage points year-on-year. Akasa Air continued to expand its international presence too, the report noted, with a market share of around 3.1 per cent.
The pattern holds even when measured by distance flown rather than headcount, according to the report.
IndiGo's share of international RPKs (passenger traffic weighted by distance) rose to around 42 per cent, while Air India Group's share of that metric fell to roughly 55 per cent, still the larger of the two by this measure, but sharply down from over 63 per cent a year earlier.
Capacity share (ASKs) shows the same shift, the report said, with IndiGo scaling up its share to 40 per cent and Air India Group's share falling to under 57 per cent.
IndiGo also continued to lead the industry with an on-time performance of 88.5 per cent in April, while Air India Group's on-time performance improved to 82.4 per cent, reflecting better operational execution, the report added. SpiceJet lagged well behind at just 31.2 per cent.
Costs: Some Relief, Some Pain
Airlines caught a break on fuel, the report said. Brent crude averaged around 72.9 USD a barrel in June, down 21 per cent from the previous month, while Singapore jet fuel corrected 12 per cent sequentially to around 112.8 a barrel USD, both providing meaningful relief after recent spikes, according to the report.
The rupee, however, remained a headwind, the report noted. At around 94.7 to the dollar, it was 10 per cent weaker than a year ago, continuing to exert pressure on dollar-denominated costs for airlines such as aircraft leases and maintenance, despite a modest sequential improvement.
The fuel relief hasn't fully trickled down to what airlines actually pay at home.
Domestic jet fuel (ATF) prices in India stood at around Rs 105,600 per kilolitre in April, up 18 per cent year-on-year and 9 per cent month-on-month, the report said, moving in the opposite direction to the falling global crude and jet fuel benchmarks. This divergence is largely a function of taxation and pricing mechanics specific to the domestic ATF market, and means Indian airlines aren't seeing the same relief at home that international benchmark prices might suggest.
What The Numbers Mean
According to the report, the sector is in a clear, gradual normalisation phase: domestic travel is resilient and growing, while international operations are healing steadily as Middle East tensions subside.
Though a full return to last year's international traffic levels isn't there yet. Equirus maintains a "LONG" rating on IndiGo, citing its dominant and improving position across both domestic and international markets, with a price target of Rs 5,255 against a current market price of around Rs 5,411, implying the brokerage sees limited further upside at current levels, though it remains structurally bullish on the stock.
SpiceJet, currently trading around Rs 12 with a market capitalisation of about Rs 18 billion, is Not Rated by the brokerage.
