India’s consumption of aviation turbine fuel (ATF) is expected to grow by almost 17 per cent year-on-year to 8.61 million tonnes (MT) in the next fiscal year beginning April 2023, an indication that air travel in the world’s fourth-biggest market will surpass pre-pandemic levels for the first time.

According to the projections by the Petroleum Planning and Analysis Cell (PPAC), India’s ATF consumption will grow from 7.39 MT in FY23 to an all-time high of 8.61 MT in FY24.

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India’s ATF demand hit a peak in FY19 with consumption of the key fuel clocking 8.30 MT, after which it slipped 4 per cent y-o-y to 8 MT in FY20, the last quarter of which witnessed Covid being declared a global pandemic. The two subsequent quarters were severely mauled by the pandemic, with ATF demand plummeting to record lows in FY21.

Revival of air travel

Between FY15 and FY20, air traffic logged a healthy compound annual growth rate of around 12 per cent, driven by growing penetration of air travel beyond metro cities on government schemes such as RCS and UDAN.

Then the pandemic hit and air traffic volume nosedived in FY21. The next fiscal (FY22) saw only partial recovery (55 per cent of FY20 traffic), given the multiple waves of infection and restrictions on the movement of people.

CRISIL Market Intelligence and Analytics Director (Research) Hetal Gandhi pointed out that airline transportation witnessed significant revival in FY23, with domestic air passenger traffic expected to rise 38-43 per cent y-o-y and international passenger traffic likely to record an 80-85 per cent y-o-y optical growth on a low base of previous year in FY22.

“Owing to these, the demand for aviation fuel is expected to witness a 45-50 per cent y-o-y growth in FY23, reaching 7.2-7.4 MT,” she added.

The demand is expected to further improve by 12-15 per cent y-o-y in FY24, said Gandhi, adding that this is on the back of a 20-25 per cent y-o-y growth in ASKM (available seat per kilometers) supporting incremental consumption.

“CRISIL Research expects ATF demand to range between 8-8.5 MT in FY24, supported by healthy growth in International as well as domestic travel,” she noted.

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