Airfares are expected to inch up in the coming quarters following rise in fuel prices, and lease rentals becoming more expensive due to the depreciating rupee, ratings agency Icra said on Tuesday.
“Even though we have seen a year-on-year decline in prices in the current year, ATF (aviation turbine fuel) prices remain at elevated levels compared to pre-Covid levels,” Kinjal Shah, senior vice president Icra said.
ATF was hiked by over 3% on November 1. ATF accounts for 30-40% of the total cost for the airlines. “They are unable to pass on the entire cost to the customers because of the need to maintain adequate PLF (passenger load factor). Such costs also come with a lag,” Shah added.
Domestic air traffic is projected to rise 7-10% to 164-170 million in the current financial year. In the first half ending September, the domestic air passenger traffic stood at 79.3 million, marking a growth of 5%.
The agency further added that airlines are expected to report a net loss of Rs 2,000-3,000 crore during FY25-26, markedly lower than the losses witnessed in the previous years, supported by continued passenger demand and better pricing power.
India had a total fleet of 853 aircraft as of end September 2024 end, of which 16-18% were grounded. From 154 aircraft grounded in September 2023, the number declined to 144 in September 2024 and is expected to reduce further.
“Airlines have to take short-term leases to meet the demand which is very strong currently. Since there is lower availability of aircraft, airlines will probably end up taking aircraft which are older and less fuel efficient,” Shah added.
