Air traffic in India up 11% in October, says ICRA report

ICRA said its outlook for the Indian aviation industry is stable on the back of the fast-paced recovery in domestic passenger traffic in FY2023 and the seven months of FY2024. The expectations of the trend continue for the remaining five months of the fiscal owing to the upcoming festive season, the ratings agency said.

“Moreover, the industry witnessed improved pricing power, reflected in the improved yields (over pre-COVID levels) and, thus the revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) spread of the airlines,” ICRA added.

However, the agency pointed out that sequential increase in ATF prices could be a challenge for the Indian aviation sector. “Despite a healthy recovery in air passenger traffic, the domestic aviation industry continues to face challenges from elevated ATF prices and depreciation of the INR vis-à-vis the USD compared to pre-Covid levels, both of which have a major bearing on the airlines’ cost structure.”

The average ATF prices stood at Rs 121,013/KL in FY2023 and Rs 103,189/KL in 8M FY2024 compared to Rs 65,368/KL in FY2020 (pre-Covid). In November 2023, the ATF prices dropped by 6.0% to Rs 112,683/KL and were also lower by 8.3% YoY basis.

The ratings agency further said that the industry is estimated to have reported a net loss of ₹170-175 billion in FY2023 due to elevated ATF prices and depreciation of the Indian rupee. However, it is much lower than the net loss of ₹217 billion in FY2022.

“The net loss is further expected to reduce significantly to Rs 30-50 billion in FY2024 as airlines continue to witness healthy passenger traffic growth and maintain pricing discipline, following the ongoing consolidation in the industry.” said ICRA in a note.