The Indian aviation sector is entering a new era of expansion and transformation, driven by rising incomes, expanding regional connectivity and tourism growth. The sector is witnessing an unprecedented surge in passenger demand, prompting airlines to enhance coverage, expand aircraft fleet and revamp their services. During January 2026, Indian airlines flew over 15.24 million domestic passengers and 3.39 million international passengers.
The segment is highly concentrated. IndiGo dominates the domestic passenger segment with a market share of around 64 per cent, followed by the Air India Group (includes Air India and Air India Express) holding approximately 27 per cent. These two entities collectively control over 90 per cent of the market. Smaller carriers such as Akasa Air and SpiceJet account for modest shares of 5 per cent and 3 per cent, respectively, while regional airlines including Alliance Air, Fly91, IndiaOne Air and Star Air collectively hold a marginal share.
Such concentration exposes the ecosystem to systemic shocks, as witnessed during the unprecedented operational disruptions faced by IndiGo in late 2025, when challenges in crew planning, new pilot rest regulations and regulatory capacity cuts triggered widespread flight delays and cancellations. Over 1.5 million passengers were affected. Regulatory intervention became necessary, with the government stepping in to control fares and protect consumers from price surges. IndiGo has since taken steps to stabilise operations by hiring over 1,000 pilots and revising scheduling practices.
Recognising the risk of a concentrated market and to ensure a more resilient market structure and mitigate unforeseen challenges, the Ministry of Civil Aviation (MoCA) has advocated for at least five airlines with a fleet of 100 aircraft each to promote healthy competition. In line with this, the government has given regulatory clearances to small new airlines such as Shankh Airlines, Al Hind Air and FlyExpress. Al Hind Air secured its no-objection certificate from MoCA in December 2025 and is targeting a launch later in 2026, with an initial focus on domestic routes from South India. Similarly, Shankh Air plans to begin operations in Uttar Pradesh from April 2026.
Fleet expansion and modernisation
Fleet expansion and modernisation are key enablers for meeting rising passenger traffic. As per industry estimates, by 2035 alone, the number of commercial aircraft with more than 100 seats is projected to almost triple to around 2,250, up from about 850 at present.
The focus is being placed on new aircraft orders, leases and refurbishing the existing fleet. In January 2026, Air India converted 15 Airbus A321neo orders to the longer-range A321XLR variant and added 30 Boeing narrow-body aircraft to its fleet. IndiGo is also stepping up efforts to expand its wide-body fleet, particularly to support long-haul operations. The airline partnered with Norse Atlantic Airways to damp-lease Boeing 787-9 wide-body aircraft, and converted purchasing rights for 30 out of 70 Airbus A350-900 aircraft into firm orders, doubling its total wide-body order from 30 to 60 aircraft. It also inducted an Airbus A321XLR aircraft into its fleet in January 2026. Of its total order of 40 A321XLR aircraft, nine are expected to be delivered in 2026. The airline plans to expand its fleet to around 600 aircraft by 2030, up from 440 in December 2025.
Akasa Air also inducted its 33rd aircraft, a Boeing 737 MAX 8-200, in February 2026. Meanwhile, SpiceJet inducted two Boeing 737 aircraft into its fleet in December 2025, taking its total fleet strength to 55. In February 2026, the airline signed an MoU for the induction of 10 aircraft. Fly91 has also recently acquired two ATR 72-600 aircraft in February 2026, taking the total fleet to six. Over the next five years, the airline aims to grow its fleet to 30 aircraft.
Focus on sustainability
The industry is turning its attention towards sustainability and alternative fuels to decarbonise the aviation sector. Sustainable aviation fuel (SAF) is emerging as a key solution, offering the potential to reduce carbon emissions while mitigating long-term fuel cost risks. MoCA is currently drafting an SAF policy. Meanwhile, the Airports Authority of India has already outlined indicative blending targets: 1 per cent for international flights by 2027, 2 per cent by 2028 and 5 per cent by 2030.
Challenges and the way forward
As airlines scale up operations, cost pressures, particularly fuel costs, remain a critical challenge. Fuel costs are one of the most significant components for airlines, often accounting for 40-50 per cent of operating expenses. The volatility of aviation turbine fuel (ATF) prices continues to pose a major risk to airline profitability. Geopolitical tensions and conflicts in key oil-producing regions have further heightened uncertainty in global energy markets, directly impacting ATF costs. In response, Indian airlines have introduced fuel surcharges to offset rising operational costs.
Challenges notwithstanding, India’s aviation trajectory remains firmly upward. Indian airlines are expected to induct around 100 aircraft annually, with the total fleet size projected to reach nearly 3,000 aircraft by 2047.
