Airfares To Remain Firm Due To Demand And Supply Mismatch: Report

India's aviation industry is poised for significant growth, with domestic carriers expected to add over 150 new aircraft in 2024, a 37 per cent increase year-on-year (YoY), according to a research report by Nuvama. However, the report mentioned that despite this notable addition, the current aircraft numbers in the country is still fall short of rapidly rising demand in the sector.

As a result, airfares are likely to remain firm in the coming months due to this demand-supply mismatch.

"We believe the aviation industry is set to grow as a whole with passenger traffic surpassing the pre-covid peak in financial year 2019 by 11 per cent. Domestic carriers are poised to add 150-plus aircraft in CY24 (up 37 per cent year-on-year), not enough to meet the demand" said the report.

The aviation industry in India is on an upward trajectory, with passenger traffic surpassing pre-covid levels, increasing by 11 per cent compared to FY19. As per the data by the Ministry of Civil Aviation, the passenger movement in India, both domestic and international, averages around 32 million passengers per month. This growing demand for air travel highlights the need for more aircraft in the market.

According to the report, Available Seat Kilometre (ASKM), a key industry metric, that measures an airline's passenger-carrying capacity, rose by 14 per cent YoY and 2 per cent month-on-month (MoM) in August 2024.

"Total Indian aviation domestic ASKM up 14 per cent YoY/2 per cent MoM in August 2024" the report added. The report stated that IndiGo continues to dominate the domestic aviation market, maintaining a 58 per cent share of the domestic ASKM in August 2024.

In contrast, the Air India group leads the international segment with a 54 per cent market share among Indian airlines. The report highlighted that Aviation Turbine Fuel (ATF) prices have seen a sharp decline, down 18 per cent YoY and 5 per cent MoM in September 2024, driven by falling crude oil prices.

This price reduction will be a great relief to airlines, potentially offsetting some cost pressures from the ongoing supply-demand imbalance. India also ranks first among the top ten countries with the highest share of low-cost carriers (LCCs) in overall airline capacity. (ANI)