The Indian aviation sector has encountered significant turbulence during August 2025, primarily due to prolonged monsoon conditions and widespread flooding, which have adversely affected passenger growth and dampened investor confidence.
As reported by Emkay Global in its latest sector analysis, domestic air travel witnessed a slight decline of 1% year-on-year (YoY), totaling 12.9 million passengers, with indications that this trend may continue into September.
IndiGo Retains Dominance, Air India Sees Positive Growth
IndiGo maintained its position as the leading airline, commanding a 64.2% share of the market, although it experienced a month-on-month (MoM) decline of 100 basis points. Conversely, the Air India Group made strides, gaining 110 basis points to reach a market share of 27.3%, marking its best performance in several months. Collectively, these two airlines accounted for nearly 92% of the domestic market, solidifying their duopoly status.
The Emkay report highlighted that Air India’s operational enhancements, such as increased load factors and improved punctuality, are promising indicators for its long-term recovery trajectory.
Improved Load Factors and On-Time Performance Boost Investor Confidence
August saw an uptick in passenger load factors (PLFs), with Akasa leading the pack at 91%. SpiceJet followed closely with 87%, while IndiGo and Air India recorded PLFs of 84.6% and 81.8%, respectively. Additionally, on-time performance (OTP) figures also saw an improvement, with IndiGo achieving the highest rate at 90.6%, and Air India advancing to 84.5%.
Despite weather-related issues accounting for over 60% of flight cancellations, analysts expressed that the operational resilience demonstrated by airlines could provide reassurance to investors who may be concerned about rising costs.
Fuel Prices and Stock Market Dynamics
Fuel expenses continue to be a significant challenge for the industry. In October 2025, the price of Aviation Turbine Fuel (ATF) increased by 3% MoM to ₹93.8 per litre in Delhi, even as crude oil prices dipped by 1%. This rise was influenced by a 15% increase in jet fuel cracks and a decline in the value of the rupee.
According to Emkay Research analysts Arya Patel and Sabri Hazarika, “Considering the current trends in crude prices and refining cracks, we anticipate that ATF prices in November 2025 will remain stable within a certain range.”
This scenario presents a complex picture for investors. While higher fuel costs typically exert pressure on airline profitability and stock performance, improved load factors and operational efficiency may offer some degree of protection. Given the volatility of aviation stocks throughout 2025, they are expected to remain vulnerable to fluctuations in oil prices and shifting passenger demand patterns.
Looking Ahead: Market Expectations
The Emkay report indicates that IndiGo’s robust market leadership continues to enhance its valuation, while Air India’s resurgence under the Tata Group could attract interest from long-term institutional investors. In contrast, smaller airlines such as SpiceJet are facing operational and financial challenges that may hinder their recovery.
As the festive season approaches, a resurgence in passenger demand is anticipated. However, investors will be closely monitoring trends in crude oil prices and ATF costs to better understand the earnings outlook for the third quarter of FY26.
