Aviation Losses To Stabilise: Report
ICRA projects FY2025 aviation losses at Rs 20-30 billion, with passenger traffic showing steady growth
The Indian aviation industry is poised for improved performance, with domestic passenger traffic projected to grow by 7-10 per cent year-on-year (YoY) in FY2025, according to ICRA. However, the industry is still expected to report losses, with estimated net losses ranging between Rs 20-30 billion in FY2025 and FY2026. This marks an improvement from earlier predictions of Rs 30-40 billion, as airlines demonstrate stronger pricing power and maintain a relatively stable cost environment.
ICRA forecasts domestic passenger traffic to reach 164-170 million in FY2025, a slight reduction from earlier growth estimates of 8-13 per cent, due to a high base in FY2024 and disruptions caused by severe heat waves in the first quarter of FY2025. International air traffic for Indian carriers is anticipated to grow at a healthier rate of 15-20 per cent during the same period.
Suprio Banerjee, Vice President & Sector Head – Corporate Ratings at ICRA, highlighted that while the industry’s net loss for FY2024 is expected to be around ₹10 billion, losses in FY2025 will be higher due to mounting pressure on yields and a modest 4% YoY increase in aviation turbine fuel (ATF) prices. The average ATF prices have surged to Rs 99,468 per kiloliter (KL) in the first five months of FY2025, compared to Rs 95,906 per KL in FY2024.
ICRA’s outlook for the Indian aviation industry remains stable, supported by better pricing discipline and robust growth in both domestic and international passenger traffic. However, the industry continues to face significant challenges, including supply chain disruptions and engine failure issues, which have grounded around 134 aircraft, or 15-17 per cent of the total fleet, as of June 2024. Additionally, global supply chain bottlenecks have restricted airlines from scaling up capacity.
With debt metrics expected to remain steady, ICRA predicts the industry’s Total Debt/Operating Profit (OPBDITA) ratio will hover around 6-6.5x, and interest coverage is likely to range between 2-2.5x in FY2025. Key cost factors such as ATF prices and rupee-dollar exchange rates remain critical to the industry’s financial stability.
