The aviation industry in the country is expected to grow in the medium to long term but is likely to continue incurring losses in the near future, according to rating agency ICRA.
Over the long term, domestic and international passengers are expected to increase at an annual rate of 20 per cent and 16 per cent respectively, resulting in an overall increase of about 19 per cent per annum.
"Growth in aviation traffic is expected to be driven by GDP growth, rapid expansion of higher income and upper income group of the population, continued liberalisation in the sector and emergence of low-cost airlines and apex fare system," ICRA said in a recent report.
However, in the short-term the industry is expected to continue to make losses because of over capacity, falling domestic traffic, high fuel prices and increased borrowing costs.
The report also points out that low-cost carriers are expected to continue exerting pressure on airfare, consequently aiding passenger traffic.
It also says India continues to have gross under penetration of air services with average air travel of 0.02 trips per person per year compared to an average of 2.02 trips per person per annum in the US.
"This signals the level of potential demand which may be generated as the economy grows and airtravel becomes more affordable for a larger population," the report points out.