Domestic air passenger traffic, grew 5.1 per cent y-o-y, to an estimated 138.9 million in May, and was significantly higher, by around 14 per cent than pre-Covid levels, credit ratings agency, Icra said on Thursday.
Icra also said, the outlook on the Indian aviation industry, is stable, amid the continued recovery in domestic, and international air passenger traffic, with a relatively stable cost environment, and expectations of the trend continuing in FY2025.
The airlines' capacity deployment in the previous month, increased 6 per cent y-o-y, and about 2 per cent higher than April, 2024, it added.
According to the agency, the domestic air passenger traffic for FY24, was around 154 million, with a y-o-y growth of around 13 per cent.
It, thus, surpassed the pre-COVID levels, of around 142 million, in FY2020, the ratings agency said, adding that the international passenger traffic for Indian carriers stood, at around 29.68 million last fiscal, registering a y-o-y growth of around 24 per cent.
Moreover, the industry witnessed improved pricing power, reflected in the higher yields (over pre-Covid levels), it said.
The momentum in air passenger traffic witnessed in FY2024, is expected to continue into FY2025. However, further expansion in yields from the current levels, may be limited, it added.
Average ATF price stood at ₹1,03,499/KL in FY2024, 14 per cent lower than ₹1,21,013/KL in FY2023, but, significantly higher by 58 per cent than the pre-Covid levels, of ₹65,368/KL in FY2020, according to Icra.
In Q1 FY2025, the average ATF price, remained higher by 5.4 per cent on a y-o-y basis. In June, 2024, it declined by 6.5 per cent, sequentially, the agency said.
Fuel cost accounts for around 30-40 per cent of airlines' expenses.
Around 45-60 per cent of the operating expenses, including aircraft lease payments, fuel expenses, and a significant portion of aircraft, and engine maintenance expenses, are denominated in dollar terms.
Some airlines have foreign currency debt. While domestic airlines, have a partial natural hedge, to the extent of their earnings from international operations, overall, their net payables are in foreign currency, it said, adding that the airlines' efforts to ensure fare hikes, proportionate to their input cost increases, will be the key to expanding their profitability margins.
The pace of recovery in industry earnings, is likely to be gradual, owing to the high fixed-cost nature of the business, the agency noted.
- Also read:ICRA: Indian Air Passenger Traffic Soars Above Pre-Pandemic Levels; to continue the same in FY25
The industry reported a net loss of around ₹170-175 billion in FY2023, due to elevated ATF prices, along with the depreciation of the rupee against the US dollar, it added.
Icra expects the Indian aviation industry, to report a similar net loss of around ₹30-40 billion in FY2025, as seen in FY2024, which is significantly lower from levels of around ₹170-175 billion in FY2023, as airlines continue to witness healthy passenger traffic growth, and maintain pricing discipline.