New Delhi, Oct. 16 -- India's aviation sector is headed for a challenging second quarter (Q2FY26), as softening domestic demand, higher fuel prices, and tighter capacity weigh on airlines' post-pandemic recovery, according to brokerage reports and data from the Directorate General of Civil Aviation (DGCA).

The slowdown is most visible in the domestic segment, which accounts for nearly 80% of total air traffic. Domestic passenger traffic fell 3% year-on-year in July to 12.61 million. This was accompanied by a 0.81% overall flight cancellation rate in the month.

The decline is partly attributed to the fatal Air India crash in June, which resulted in reduced capacity and a loss of market share for the Tata Group company.

August passenger ...