India’s airline capacity contraction hints at shifting market dynamics as low-cost carriers face renewed pressures

India’s airline market continues to tighten in August, with capacity decreasing across major carriers amid a shifting landscape that favours growth in full-service airlines and international routes, as low-cost carriers face operational pressures.

Data from aviation research firm OAG shows India’s airline market continued to tighten in August, with capacity falling 1.5% year on year as carriers trimmed seats across both domestic and overseas routes. Low-cost airlines still dominated the market with 69% of capacity, but that was down 1.6% from a year earlier, while full-service carriers accounted for 7.2 million seats, a 1.2% decline.

IndiGo remained by far the largest carrier, holding about half of all capacity in the country with 11.7 million seats. Air India was the second-largest airline with 3.3 million seats and a 14% share, but its capacity fell 4.2% from August 2025. Air India Express also reduced seats, while SpiceJet recorded the sharpest decline among major operators. Akasa Air was one of the few growth stories, adding capacity at the fastest pace among Indian carriers.

The shift comes as India’s airline landscape continues to be reshaped by pressure on margins and a broader rebalancing between low-cost and full-service models. The Financial Express reported earlier this year that full-service network airlines had expanded faster than low-cost rivals, lifting their market share to 31% in June 2026, as operational challenges and geopolitical disruptions weighed more heavily on budget carriers. OAG’s wider July data also pointed to a year-on-year fall in both domestic and international seat capacity, underlining how fragile growth has become.

Internationally, the United Arab Emirates remained the busiest market from India even after a 4% fall in capacity to 1.1 million seats. Saudi Arabia gained ground, while Thailand, Malaysia, Sri Lanka and Singapore all saw smaller offerings. Capacity to the UK rose sharply, making it one of the fastest-growing long-haul routes, even as Indian carriers continued to pull back in some overseas markets amid restructuring and losses.