“The domestic aviation industry continues to witness recovery, with domestic passenger traffic for November 2022 estimated at ~117 lakh, ~3% higher compared to ~114 lakh in October 2022 and ~11% higher in comparison to the domestic passenger traffic in November 2021, although it fell short by ~10%, compared to pre-Covid levels i.e. November 2019. For 8M FY2023 (April-November 2022), domestic passenger traffic is estimated at ~858 lakh, a YoY growth of ~74%, and lower by ~10% compared to April-November 2019 (pre-Covid levels).
The airlines’ capacity deployment in November 2022 was slightly higher (less than ~1%) than in November 2021. However, it was lower by ~12% than the pre-Covid levels. It is estimated that the domestic aviation industry operated at a passenger load factor (PLF) of ~89% in November 2022, against ~80% in November 2021 and ~90% in November 2019.
A steady rise in prices of aviation turbine fuel (ATF) and a general inflationary environment continue to dampen the industry earnings, with ATF prices in December 2022 higher by ~53% on a YoY basis. Although, the same declined by 2.2% sequentially. While airlines have been increasing yields, in ICRA`s view, the same has not been adequate to offset the impact of the rising ATF prices. The delay in delivery of components and spares for aircraft and engines continues to impact the sector, thereby leading to the grounding of certain aircraft for some domestic airlines.
A quick recovery in domestic passenger traffic is expected in FY2023, aided by normalcy in operations and the waning pandemic. However, the earnings recovery for domestic airlines will be slow-paced due to elevated ATF prices in addition to the rupee depreciation against the US$ amid a heightened competitive environment.”
