Domestic air traffic to grow to 130 million in FY18, says CAPA

However, industry-wide losses to widen because of cost pressure and fall in yield

Domestic air traffic is expected to grow 25 per cent and cross 130 million in financial year 2017-18 but airlines will see bigger risks to profitability because of rising costs and yield pressures, aviation consultancy CAPA said in its India outlook on Wednesday.

Domestic traffic has been rising at 20 per cent plus for the past three years and, in 2016, carriers flew close to 100 million passengers.

The growth trend will continue and airlines will add over 60-65 planes. Most of these additions will be by low cost airlines.

CAPA expects industry-wide losses in the country to grow from $250-300 million to $ 380-450 million in FY17 and FY18, respectively. Losses are likely to increase in Air India, AirAsia India and Vistara. Further, airlines will face yield pressures and find it difficult to cut costs. Other domestic airlines will continue to make profit.

Kapil Kaul, South Asia CEO of CAPA, said that the share of low-cost airlines in India will rise from the existing 65 per cent to 80 per cent. "IndiGo is expected to induct two aircraft every month till March 2018 and the fleet size is expected to reach 160. IndiGo's market share will reach 55-60 per cent in two years and this will increase the strategic compulsion for other airlines to expand fleets in order to remain relevant in the market," Kaul said.