India’s aviation industry could return to profitability in 2023-24 for the first time since the pandemic, predicts CRISIL. In the latest forecast for Indian aviation market CRISIL forecasts aggregate net loss of 80% year-on-year (YoY) between INR 35bn and INR 45bn in FY 2022-23 as compared to INR 1750 crore net loss in FY 2021-2022.
CRISIL attributes this profit to the strong passenger recovery and easing cost pressure due to stable fuel and foreign exchange (forex) costs.
As per CRISIL records, domestic and international passenger traffic recovered to 90 % and 98% respectively, of pre-pandemic traffic (2019-20, or FY20), in April-December 2022, compared with April-December 2019.
The momentum could be maintained if the Indian economy remains resilient.
Apart from lower fuel costs, the removal of fare caps is also helping. Debt reduction owing to the privatisation of Air India and expected equity infusions would reduce the reliance on debt excluding lease liabilities.
CRISIL projects passenger traffic to cross pre-pandemic levels and pricing to be higher by 20-25% over FY20 for the FY23. Hence, civil aviation could register 25-30% revenue growth next financial year, compared with the pre-pandemic period.
The aviation sector is likely to raise equity of INR 8-10bn over the next two financial years, towards increasing fleet size.
But key risks remain. If equity infusion does not happen, and there is a new debt contracted for capital expenditure on fleet expansion or a resurgence of Covid cases the expectation could break down, CRISIL said.