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H2FY18 may see better air passenger growth: ICICI Securities

Domestic air traffic grew by 16.5% in Sept with an average passenger load factor of 84.5%

Press Trust of India  |  Mumbai 

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Airport. Source: iStock

The air passengers traffic is likely to post a better growth in H2FY18 on the back of an expected increase in the spare engines supply for A320 Neo operators coupled with likely addition of eight leased aircraft in the fleet by March next year, a report has said.

Besides, the trend of lower passenger growth and higher fares is likely to reverse in the second half of the fiscal, offset by higher crude prices, said the report by stock brokerage Securities.

grew by 16.5 per cent in September with an average passenger load factor (PLF) of 84.5 per cent.

PLF is a measure of how much of an airline's passenger carrying capacity is used or average percentage of seats filled in an aircraft.

"The traffic growth is set to improve in H2FY18 on the back of better spare engine availability for Neo (New Engine Option) operators. Additionally, is also set to add total eight aircraft by March end. This essentially implies that airlines remain on track to meet our FY18 passenger estimates," it said.

The two domestic airlines -- and -- have been forced to ground their Neo engine-fitted A320 planes due to the frequent glitches in the engines.

However, Pratt & Whitney, the US-based maker of these engines, had last week said it has provided more than 20 spare engines to the two carriers and that none of their aircraft is on the ground now.

The Neo operators will benefit from the revised strategy of the engine supplies, it said.

"In their recent call, United Technology, the parent company of P&W, said they have made a change of plans in their engine delivery order, by which more spare engines will now be redirected to existing lanes instead of newly built airframes waiting for engines," according to the report.

Regarding the bearing seal issue, P&W indicated that it would be an extension of an in-service fix that affected operators flying in particularly harsh environments, notably India, and was largely completed.

"P&W shipped 120 GTFs in the third quarter, nearly doubling its first-half output of 134, which was plagued by nagging supply-chain issues tied to fan-blade production. The uptick has P&W on pace to meet its full-year guidance of 350-400 engines," the retail brokerage firm said.

According to it, among airlines, highest passenger growth was reported by SpiceJet at 26 per cent, followed by at 14 per cent per cent and at 8 per cent.

The passenger growth for IndiGo, SpiceJet and Jet Airways in the April-October period stood at 20 per cent, 24 per cent and eight per cent, respectively, the report added.

All these three airlines remain on track to meet the passenger growth estimates for the current fiscal, it said.

Noting that the growth in the first half of the fiscal was marked by a higher fare and lower passenger growth, the report forecast this trend to reverse in the second half.

"H1FY18 domestic passenger growth was 16 per cent compared to 23 per cent in the same period year ago. However, the fares have been higher for most airlines in the first half of the fiscal. In H2FY18, we would expect the trend to reverse. and will ramp up the Neo addition, while Jet Airways will add eight aircraft during this period.

"Besides, regional airline capacity would also increase driven by ATR induction of IndiGo from December," it said.

First Published: Mon, October 30 2017. 21:09 IST
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