After A Stormy Year, Jefferies Backs Airports As Travel's Top Bet In 2026 — What's Driving The Optimism?

India’s travel sector is expected to enter 2026 on a steadier footing after a disrupted 2025, according to a new outlook by Jefferies, which sees airports emerging as the clear outperformers, followed by airlines and then hotels.

The brokerage said 2025 began strongly but lost momentum due to a series of one-off shocks. These included a fatal Air India crash in June, heightened geopolitical tensions between India and Pakistan, an extended monsoon season, and a year-end scheduling crisis at IndiGo.

Together, these factors dented travel sentiment, triggered capacity cuts and weighed on stock performance across the sector.

Jefferies noted that air passenger growth slowed sharply in the first half of FY26, rising just 1% year-on-year, with another deceleration seen in December. Hotel performance also moderated, with RevPAR growth easing to around 6-7% in the September quarter, compared with mid-teen gains over the previous four quarters.

Jefferies is most constructive on airports, citing traffic normalisation, rising retail spends and steady real estate monetisation. New airports at Navi Mumbai, Noida and Bhogapuram are expected to add growth momentum, alongside further privatisation opportunities.

For GMR Airports, per-passenger spending at Delhi and Hyderabad continues to scale up, while progress in airport-adjacent real estate projects provides an additional earnings lever.

Jefferies expects an EBITDA CAGR of around 28% for GMR Airports over FY25-28, with regulatory clarity offering potential upside.

India's airline industry is entering 2026 amid what Jefferies described as a structural reset. Revised flight duty norms, pilot shortages and tighter regulatory scrutiny have shifted the focus from aggressive capacity expansion to operational stability.

Rising costs from a weaker rupee and higher crew expenses are likely to push airlines to protect margins through yield management, ancillary revenues and a greater focus on premium and international routes.

IndiGo’s upcoming induction of Airbus A321XLR aircraft is expected to support its international expansion, while its FY27 available seat kilometre (ASK) guidance remains a key swing factor for estimates. Jefferies expects capacity constraints to ease gradually through calendar year 2026, though demand-supply dynamics should remain broadly balanced, supporting a firm pricing environment.

The hotel sector is likely to see a mild moderation after four strong post-Covid years. While demand tailwinds remain intact, a high base and improving supply pipeline are expected to temper growth. Jefferies projects RevPAR CAGR of 7-8% over FY25-28, with EBITDA growth of 13-16%.

Among hotel operators, Indian Hotels is seen as better positioned due to its diversified revenue streams and more cycle-resilient portfolio.

Overall, Jefferies’ pecking order for 2026 is clear: Airports first, airlines next, and hotels last, reflecting where resilience and earnings visibility are strongest.