The domestic air passenger traffic in India crossed the 10-million-mark (in a single month) for the first time in the history of Indian aviation during the month of May 2017. This was due to peak season demand, whereby the passenger load factor (PLF) for the domestic aviation industry touched a new high of 88.9 per cent, the highest over the last seven years, a note by rating agency ICRA said.
According to an ICRA note, with the planned expansion by existing airlines and scale-up by new airlines, the capacity addition in the industry is likely to remain healthy in the current year, despite the industry capacity growth (measured in available seat kilometers – ASKMs) being moderate at 14.9 per cent in May 2017.
The moderation in supply growth is likely to have benefited airline yields to some extent in Q1 FY2018. Further, sequentially stagnant aviation turbine fuel (ATF) prices are expected to provide support to airline profitability in the quarter, the note added.
According to Anand Kulkarni, AVP and Associate Head, Corporate Sector Ratings, ICRA, "Going forward, maintaining price discipline in an intensely competitive environment would be essential for maintaining/ improving the financial risk profile of airlines. Further, ICRA has been highlighting the weak performance of regional airlines due to intense competition, and the same is reflected in the suspension of operations of Air Carnival, the third regional airline to shut down in the recent past. This is an indication of an intensely competitive environment becoming unsustainable for new players."