Domestic air passenger traffic in June 2024 increased by 6.3% compared to the previous year, and showed a notable 10.4% rise from pre-pandemic levels, ratings agency ICRA said on Tuesday (July 9). The agency also reported a 7% year-on-year increase for domestic airlines, although it noted a 3% decline compared to May of the previous year.
A report indicates that the momentum in air passenger traffic is set to continue, with airlines projected to incur a net loss of Rs 3,000-4,000 crore for the fiscal year ending March 2025, mirroring trends seen in the previous year.
In June, domestic air passenger traffic was estimated at 132.8 lakh, slightly down by 3.7% from May but showing a 6.3% increase from the same period last year.
Stable outlook for India’s aviation industry
Icra report affirmed a stable outlook for India’s aviation industry, citing ongoing recovery in both domestic and international air travel. They anticipate this positive trend to persist into FY2025, albeit with limited potential for further yield expansion from current levels.
“The momentum in air passenger traffic witnessed in FY2024 is expected to continue into FY2025, though further expansion in yields from the current levels may be limited,” it noted.
Supply chain disruptions and fleet groundings
The report highlights that the industry’s earnings recovery will likely be gradual due to its high fixed-cost nature. Challenges such as supply chain disruptions have grounded approximately 24-26% of Indian airlines’ fleet as of March 31, 2024.
Issues with engine suppliers like P&W have further exacerbated operating expenses through increased lease rentals and reduced fuel efficiency from older replacement aircraft.
Issue of pilot and cabin crew shortages
Despite these challenges, the sector benefits from healthy yields and high passenger load factors, with some relief expected from engine OEMs. Nevertheless, ongoing issues like pilot and cabin crew shortages have led to flight cancellations and delays, impacting capacity and customer satisfaction.
In the first quarter of FY2025, domestic air passenger traffic registered a 4.4% annual growth, totaling approximately 402.7 lakh passengers. Looking ahead, the report emphasizes that airlines’ ability to raise yields in proportion to rising costs will be crucial for expanding profitability margins.