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April 17, 2024

ICRA Comments on Aviation Industry Monthly Domestic Passenger Traffic Data for May 2023 

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

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

The domestic air passenger traffic for May 2023 is estimated at ~131.8 lakh, marginally higher by ~2.3% in comparison to ~128.9 lakh in April 2023. Further, it witnessed a YoY growth of ~15% in comparison to ~115 lakh in May 2022 and 8% higher than pre-Covid levels of ~122 lakh in May 2019.

The airlines’ capacity deployment in May 2023 was higher by ~1.4% than in May 2022, thus reaching the pre-Covid levels of May 2019. It is estimated that the domestic aviation industry operated at a passenger load factor (PLF) of ~94% in May 2023, against ~83% in May 2022 and ~90% in May 2019 (pre-Covid levels).

Despite a healthy recovery in passenger traffic, the domestic aviation industry continues to face challenges on account of elevated ATF prices and depreciation of the INR vis-à-vis the US$ compared to the pre-Covid era, both of which have a major bearing on the airlines’ cost structure. While the ATF prices have witnessed a sequential decline over the past five months, with June 2023 witnessing a sequential and a YoY decline of 7% and 27%, respectively, they still remain at elevated levels when compared to the pre-Covid era. The airlines’ efforts to ensure fare hikes proportionate to their input cost increases, will be key to expanding their profitability margins.

In addition, supply-chain challenges being faced by airlines, which include the availability of spare parts and engine issues have recently plagued the sector, resulting in the grounding of certain aircraft for some airlines, thus impacting their overall capacities. This also negatively impacts the cash flow generation of the airlines, given the high fixed-cost nature of the business.”

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