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May 23, 2024

Year-End Sectoral Views on Aviation Industry

Suprio Banerjee, Vice President & Sector Head - Corporate Ratings, ICRA Limited

Suprio Banerjee, Vice President & Sector Head – Corporate Ratings, ICRA Limited  

The domestic aviation industry, which reeled through heightened challenges since the onset of Covid-19, continued its turbulent journey in CY2022, with the resurgence of the Omicron wave at the start of CY2022. From March 2022 onwards, monthly domestic passenger traffic has been witnessing a consistent YoY growth but is still lagging the pre-Covid levels. ICRA expects the domestic passenger traffic to witness YoY growth of ~48-54% in FY2023 to 125-130 million and reach pre-Covid levels in FY2024. ICRA expects international passenger traffic for Indian airlines to witness a YoY growth of ~116-135% to 22-24 million in FY2023 and further to 25-27 million in FY2024.

Aviation turbine fuel (ATF) prices have witnessed a YoY increase of 52.7% in CY2022. This, coupled with the depreciation of the INR against the US$, has added to the industry woes and hardening yields by around 30-35 % over pre-Covid levels. However, the same has been inadequate to compensate for the increase in costs, and thus, the Indian aviation industry is estimated to report a net loss of ~Rs. 150-170 billion in FY2023, although lower than Rs. 235 billion in FY2022. ICRA’s outlook on the industry remains negative, reflecting its view that the financial performance of Indian airlines will remain under pressure in the near term.

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