India’s domestic air passenger traffic witnessed a 6.3 per cent Year-on-Year (YoY) growth in June 2024 as the numbers stood at 1.32 crore for the month, according to ratings agency Icra. The numbers are higher by 10.4 per cent than pre-covid levels. In the first quarter of the Financial Year (FY) 2025, domestic air passenger traffic was 4.02 crore which registered a 4.4 per cent YoY growth as well.
The airlines’ capacity deployment too registered a 7% YoY growth in June 2024 even though the numbers fell by 3 per cent as compared to May 2024. Icra has presented a stable outlook on the Indian aviation industry due to the continued recovery in domestic and international air passenger traffic along with a relatively stable cost environment and expectations of the trend continuing in FY2025.
Despite a healthy recovery in air passenger traffic, the situation remains monitorable due to an increase in aviation turbine fuel (ATF) prices. In Q1FY25, the average ATF price of Rs 1,00,776 per kilo-litre (KL) was higher by 5.4 per cent on a YoY basis. The average ATF prices stood at Rs 103,499 per KL in FY2024 which was significantly higher by 58 per cent than the pre-Covid level of Rs. 65,368 per KL in FY2020. Rising fuel costs are one of the primary reasons for fare hikes as they account for 30 to 40 per of the airlines’ expenses, as per Icra.
As airlines continue to witness healthy passenger traffic growth, Icra expects the Indian aviation industry to report a similar net loss of Rs. 30 to 40 billion in FY2025 as seen in FY2024, which is significantly lower than the level of Rs. 170 to 175 billion in FY2023. The airlines’ ability to raise yields proportionate to their input cost increases will be key to expanding their profitability margins, Icra stated in its report.
Icra has also highlighted the supply chain challenges and issues of engine failures for the Pratt and Whitney (P&W) engines supplied to various airlines. In FY2024, Go Airlines (India) limited grounded half of its fleet due to faulty P&W engines. InterGlobe Aviation Limited (IndiGo) has also grounded more than 70 aircraft due to the P&W engine issue, as on May 23, 2024. In the current fiscal, the industry has also faced challenges related to the availability of pilots and cabin crew, leading to several flight cancellations and delays.
