Air traffic in the country is expected to increase by 7-10% to 164-170 million this fiscal year, while the loss of the aviation industry is estimated at Rs 2,000-3,000 crore during the same period, according to rating agency Icra.
In the first half of 2024-2025, Icra said domestic air passenger traffic stood at 79.3 million, marking an annual growth of 5.3 percent that was partly affected by extreme heat and other weather-related disturbances.
Global passenger traffic growth for Indian carriers has grown and stood at 16.2 percent in the first half of the current fiscal year. On Tuesday, the rating agency said domestic air traffic is expected to jump 7-10 percent annually to 164-170 million by FY2025.
Icra has maintained a ‘stable’ outlook on the Indian aviation industry, amid continued growth in domestic and international passenger traffic.
Kinjal Shah, Senior Vice President and Group Head at Icra, said the industry is expected to report net losses of Rs 20-30 billion in FY2025 and FY2026 each, which is well below the losses seen in the past supported by improved pricing power. of aircraft.
“The spread between revenue per available seat kilometer and cost per available seat kilometer showed some reduction in H1 FY2025 during FY2024 due to rising fuel prices and rising costs between aircraft grounding, while profits were reduced slightly as airlines struggled to maintain adequate passenger load factors .
“However, the same is expected to pick up in H2 FY2025, amid healthy passenger traffic,” Shah said. The cost structure of airlines is generally driven by two key components — Aviation Turbine Fuel (ATF) prices and INR-USD movements.
On a year-on-year basis, Icra said ATF prices fell by 6.8 percent to Rs 96,192/KL in the first eight months of FY2025, although they exceeded the levels seen in the pre-Covid period (first eight months of FY2020). Rs 65,261/KL.
Fuel costs make up about 30 to 40 percent of an airline’s costs, while about 35-50 percent of operating costs, including aircraft lease payments, fuel costs and a significant portion of aircraft and engine maintenance costs are paid in dollar terms.
“Some airlines also have foreign currency liabilities. Although domestic airlines also have a natural tendency in part due to the level of income from their foreign operations, overall, they have surpluses payable in foreign currency,” the rating agency said in a release.
