According to rating agency Icra, the projections of domestic air traffic go up 7-10 per cent to 164-170 million in this fiscal year. Aviation is also estimated to have been facing a loss of between Rs 2,000 and 3,000 crore through the same period.
During the first half of 2024-25, Icra said domestic air passenger traffic stood at 79.3 million with an annual growth of 5.3 per cent, that was partly marred by the severe heat wave and other weather-related disruptions.
Passenger traffic growth for international, for Indian carriers increased in the first half of the current financial year with 16.2%.
On Tuesday, the rating agency said that domestic air traffic is expected to jump 7-10 per cent on an annual basis to 164-170 million in FY2025.
Icra maintained a 'stable' outlook on the Indian aviation industry, amidst continued growth in domestic and international air passenger traffic.
Kinjal Shah, Senior Vice President & Co-Group Head at Icra said the industry is likely to incur a net loss of Rs 20-30 billion in FY2025 and FY2026 each, much lower than the losses the industry has faced in the past supported by improved pricing power of the airlines.
"The yield and revenue per available seat kilometre minus cost per available seat kilometre saw some moderation in H1 FY2025 over FY2024 due to higher fuel prices and overall increased costs amidst grounding of aircraft, while yields moderated marginally as airlines tried to maintain adequate passenger load factors.
"However, the same is expected to pick up in H2 FY2025, amid healthy passenger traffic," Shah said.
Two major drivers of the cost structure of airlines are ATF prices and the INR-USD movement.
On a year-on-year basis, Icra said average ATF prices eased by 6.8 per cent to Rs 96,192/KL in the first eight months of FY2025, though exceeding the levels seen during the pre-Covid period (first eight months of FY2020) of Rs 65,261/KL.
Fuel costs account for about 30 to 40 per cent of an airline's costs, while a significant 35-50 per cent of the operating expenses, including aircraft lease payments, fuel expenses, and a significant portion of aircraft and engine maintenance expenses are denominated in dollar terms.
"Some airlines also have foreign currency debt. While the domestic airlines also have a partial natural hedge to the extent of earnings from their international operations, overall, they have net payables in foreign currency," the rating agency said in a release.
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