Suprio Banerjee, Vice President & Sector Head – Corporate Ratings, ICRA Limite
The domestic aviation industry continues to witness recovery, with domestic passenger traffic for January 2023 estimated at ~125 lakh, ~2% lower compared to ~127 lakh in December 2022 and ~96% higher in comparison to the domestic passenger traffic in January 2022 which was ~64 lakh and only short by ~2%, compared to pre-Covid levels, i.e. January 2020, that was ~127 lakh. For 10M FY2023 (April-January 2023), domestic passenger traffic is estimated at ~1,110 lakh, a YoY growth of ~66%, and lower by ~9% compared to April-January 2020 (pre-Covid levels) which was at ~1,214 lakh.
The airlines’ capacity deployment in January 2023 was higher by 42% than in January 2022. However, it was lower by ~6% than the pre-Covid levels. It is estimated that the domestic aviation industry operated at a passenger load factor (PLF) of ~90% in January 2023, against ~65% in January 2022 and ~86% in January 2020.
An elevated aviation turbine fuel (ATF) and a general inflationary environment continue to dampen the industry earnings, with ATF prices in February 2023 higher by ~32% on a YoY basis. Although, the prices remained lower by ~4% sequentially. The airlines’ efforts to ensure fare hikes proportionate to their input cost increases will be key to expanding their profitability margins.
FY2023 is witnessing a quick recovery in domestic passenger traffic, aided by normalcy in operations and the waning impact of the pandemic. However, the earnings recovery for domestic airlines will be gradual due to elevated ATF prices in addition to the depreciation of the INR against the US$ amid a heightened competitive environment.