Domestic air passenger traffic expected to surpass pre-Covid levels: ICRA

The domestic air passenger traffic is expected to surpass the pre-Covid levels of 141.2 million and reach 150-155 million this fiscal, registering an estimated growth of 8-13 per cent, credit ratings agency Icra said on Wednesday.

Icra also projected a significant reduction in industry's net loss for the next two fiscals and was also of the view that supply-chain challenges and engine failure issues may remain near-term headwinds.

Icra maintains a "stable" outlook on the domestic aviation industry, amidst the continued recovery in domestic and international air passenger traffic, and relatively stable cost environment, it said.

The momentum in traffic growth is expected to continue in FY2025 as well, with a similar estimated year-on-year growth, aided by rising demand for both leisure and business travel and improving airport infrastructure, it said.

The international passenger traffic for Indian carriers surpassed the pre-Covid levels in FY2023, although it trailed the peak levels of 25.9 million witnessed in FY2019, according to Icra.

It is expected to cross this level in the current fiscal, with an estimated 25-27 million passengers, representing a YoY growth of 7-12 per cent, the ratings agency said, adding the same is expected to further grow by 7-12 per cent to 27-29 million in FY2025.

"The industry has witnessed improved pricing power, as reflected in increase in yields and thus the spread between revenue per available seat kilometre-cost per available seat kilometre (RASK-CASK) for the airlines.

"The same is expected to remain favourable, aided by a decline in aviation turbine fuel (ATF) prices and the relatively stable foreign exchange rates," said Suprio Banerjee, Vice President and Sector Head for corporate ratings at Icra.

The industry is thus estimated to report a significantly lower net loss of Rs 300-4,000 crore (Rs 30-40 billion) in FY2024 and FY2025 compared to Rs 170-175 billion in FY2023, he added.

According to the ratings agency, the ATF prices and indian rupee-US dollar movement have a major bearing on the airlines' cost structure.

The average ATF price stood at Rs 103,547/KL in the April-February period of FY2024, which is a YoY decline of 15 per cent compared to Rs 120,978/KL in FY2023, it said.

However, this was 60 per cent higher compared to an average of Rs 64,715/KL during FY2020, as per Icra.

Fuel accounts for around 30-40 per cent of the airlines' expenses.