The Indian airline industry is likely to cut down its losses to about INR 50 billion in FY24, owing to healthy passenger traffic and the ability to shore up their yields, according to a recent report published by Investment, Information and Credit rating Agency (ICRA).
Owing to an elevated aviation turbine fuel (ATF) price coupled with the depreciation of Indian rupee against the US dollar, the Indian airline industry reported a net loss of about INR 110-130 billion FY23, the report read.
However, the loss figure is much lower than the net loss of about INR 235 billion in FY2022 and ICRA's earlier estimated net loss of INR 150-170 billion in FY2023, primarily driven by improved ability of the airlines to shore up their yields without impacting demand.
The net loss is further expected to reduce to INR 50-70 billion in FY24 as airlines continue to witness healthy passenger traffic growth and pricing discipline. According to the report, the pace of recovery in industry earnings will be gradual owing to the high fixed-cost nature of the business.
On the financial strength of the players, the ICRA said some airlines have adequate liquidity or financial support from a strong parent, which can help them sustain over the near term, for others, the credit metrics and liquidity profile will remain under stress over the near term, though better than over the past few years.
The credit rating agency said capacity addition in FY23 has been limited to around 10% of the FY22 fleet of airlines, which was close to around 700 aircraft.