India's Domestic Air Traffic Up 8% In Sept 2024
Despite industry challenges, this traffic surpasses pre-covid levels with 132 lakh passengers
The Indian aviation industry recorded a robust 8 per cent year-on-year growth in domestic passenger traffic for September 2024, with approximately 132 lakh passengers, Icra report stated. This shows a 15 per cent increase compared to pre-covid levels in September 2019. However, despite this growth, the industry faces significant profitability challenges due to high fuel costs and operational hurdles.
The Icra report highlighted that the Indian aviation industry is expected to incur a net loss ranging between Rs 20 to 30 billion in both FY2025 and FY2026. Elevated aviation turbine fuel (ATF) prices and persistent supply chain issues, such as engine failures and delays in aircraft maintenance, continue to weigh heavily on airlines’ bottom lines.
The report stated that the domestic passenger traffic grew by 8.1 per cent in September 2024 compared to the same month in 2023, reaching 132 lakh passengers. Compared to August 2024, this represents a marginal month-on-month increase of 0.8 per cent, indicating consistent growth in air travel demand. Notably, this growth is 15 per cent higher than pre-Covid levels in September 2019, showcasing a strong rebound for the sector.
Notably, Indian carriers reported a significant 15.7 per cent increase in international passenger traffic during the first half of FY2025 compared to the previous year. This rise in international travel demand is contributing to the overall recovery of the industry.
Despite the rise in passenger traffic, the report warns of operational challenges affecting airline capacity. As of June 2024, around 15-17 per cent of the total industry fleet remains grounded due to supply chain issues, including engine failures and delays in maintenance. These issues have impacted the availability of aircraft, limiting the airlines’ ability to fully capitalise on the growing passenger demand.
Fuel Costs Strain Profitability
One of the key factors impacting the industry’s financial performance is the high cost of aviation turbine fuel (ATF). Although ATF prices have remained stable in FY2025 so far, they are still 48 per cent higher than pre-Covid levels. This, coupled with the rupee's depreciation against the US dollar, has placed significant pressure on operating costs, making it difficult for airlines to turn a profit despite rising passenger numbers.
While the industry posted a smaller loss of Rs 10 billion in FY2024, Icra projects that the losses will widen to Rs 20-30 billion in FY2025 and FY2026. The combination of high fuel prices, supply chain disruptions, and increasing operating costs is expected to continue affecting the sector’s profitability.
Despite the challenges, the Indian aviation sector is on a strong growth trajectory in terms of passenger traffic. However, to achieve sustained profitability, airlines will need to address critical issues such as fleet availability and cost control, particularly with fuel prices and currency fluctuations.
The report also noted that as global travel demand increases, Indian airlines have the opportunity to strengthen their international market presence, but only if they can overcome the current operational constraints.
