The Indian domestic air passenger traffic touched 12.5 million in January 2023, showing an increase of 96% year-on-year increase and 2% lower as compared to pre-pandemic levels, according to Investment Information and Credit Rating Agency of India Limited (ICRA). The traffic figures in January 2021 were 6.4 million.
ICRA in its latest report has given a negative outlook of the Indian aviation industry as the airlines continue to buckle under financial pressure in spite of robust domestic air travel recovery. The report further goes on to add that the despite meaningful improvement in passenger traffic in 2023, the pace of recovery in the industry earnings will be gradual.
ICRA also predicted that the net loss to Indian civil sectors in FY23 is expected to lower compared to the INR 235 bn loss in FY2022.
In January this year, airlines' capacity deployment was higher by around 42% than January 2022 while it was lower by about 6% than the pre-Covid levels.
"FY2023 is witnessing a quick recovery in domestic passenger traffic, aided by normalcy in operations and the waning impact of the pandemic,” said Suprio Banerjee, vice president and sector head for corporate ratings at ICRA. “However, the earnings recovery for domestic airlines will be gradual due to elevated Aviation Turbine Fuel (ATF) prices in addition to the depreciation of the Indian rupee against the US dollar amid a heightened competitive environment,” he added.
ICRA further noted that elevated ATF prices will continue to pose a major threat to earnings and the liquidity profile of the airlines in the near-to-medium-term. Also, the depreciation of the Indian rupee against the US dollar which adversely impacts lease rentals, maintenance cost and other overheads will have a major bearing on the airlines' cost structure.