Credit ratings agency Icra has forecasted a robust recovery in domestic air passenger traffic, anticipating a surpassing of pre-Covid levels during this fiscal year. Let’s delve into the details of their projections and insights.
Positive Growth Outlook
Icra’s outlook is optimistic, expecting domestic air passenger traffic to reach 150-155 million, marking an estimated growth of 8-13 percent compared to pre-pandemic figures. This growth trajectory signifies a significant rebound for the aviation sector.
Stable Industry Environment
The credit ratings agency maintains a “stable” outlook for the domestic aviation industry, attributing it to the ongoing recovery in both domestic and international air passenger traffic. Additionally, a relatively stable cost environment contributes to this positive assessment.
Continued Momentum
The momentum in traffic growth is anticipated to persist beyond the current fiscal year. FY2025 is projected to see a similar year-on-year growth trend, buoyed by increasing demand for leisure and business travel, coupled with enhancements in airport infrastructure.
International Passenger Traffic
While international passenger traffic for Indian carriers has already exceeded pre-Covid levels, Icra predicts further growth in this segment. The agency estimates a YoY growth of 7-12 percent, with international passengers expected to reach 27-29 million in FY2025.
Factors Influencing Industry Performance
Icra highlights several factors contributing to the improved industry performance. These include enhanced pricing power, reflected in increased yields, favorable RASK-CASK (Revenue per Available Seat Kilometer – Cost per Available Seat Kilometer) dynamics, and a decline in aviation turbine fuel (ATF) prices.
Cost Dynamics and Financial Projections
The agency notes that fuel costs constitute a significant portion of airlines’ expenses, impacting their overall cost structure. With a decline in ATF prices and stable foreign exchange rates, Icra anticipates a considerably lower net loss for FY2024 and FY2025 compared to previous fiscal years.
Industry Resilience
Despite ongoing challenges such as supply-chain disruptions and engine failure issues, the aviation industry’s resilience and adaptability are evident in its recovery trajectory. Icra’s projections reflect a positive outlook for the sector, signaling a gradual return to pre-pandemic levels of activity.
