Over 2 % growth in domestic passenger traffic in Aug vs July: ICRA

MUMBAI:

Domestic air passenger traffic

was estimated at about 133 lakh for the month of August, which was approximately 2.3% higher than the 130 lakh recorded in July, said credit rating agency

ICRA

in its monthly report released on Wednesday.
Passenger traffic grew by about 7% on a year-over-year basis in the domestic sector, which was notably higher by about 12.7% compared to pre-Covid levels registered in August 2019, it added.

Airlines’ capacity deployment in August was higher than in August 2023 by about 6.8%, and also higher by about 2.3% compared to July 2024.
In the five months from April to August 2024, domestic air

passenger traffic

totaled about 665 lakh, with a year-over-year growth of approximately 5.3%. Further, for the first four months of FY2025, the international passenger traffic for Indian carriers stood at about 108 lakh, showing a year-over-year growth of 15.8%, which is 49.3% higher than the pre-Covid level of 72.4 lakh.
The outlook for the Indian aviation industry remains stable, driven by expectations of moderate growth in domestic air passenger traffic and a relatively stable cost environment in FY2025, ICRA said. “Moreover, the industry witnessed improved pricing power, reflected in the higher yields (over pre-Covid levels) and, thus, the revenue per available seat kilometer–cost per available seat kilometer (RASK–CASK) spread of the airlines. The momentum in air passenger traffic observed in FY2024 is likely to marginally taper to 7-10% in FY2025 (compared to 13% in FY2024), pegged lower than ICRA’s earlier estimate of 8-13%, given the high base of FY2024 and lower passenger traffic in Q1 FY2025, impacted by severe heat waves and other weather-related disruptions,” it said.

“Yields are also likely to be under pressure, as airlines strive to maintain adequate passenger load factor (

PLF

) amidst elevated aviation turbine fuel (ATF) prices. International passenger traffic for Indian carriers is expected to grow by 15-20% in FY2025 and FY2026 each,” it added.
ATF prices in H1 FY2025 remained stable on a year-over-year basis but significantly elevated over pre-Covid levels. “Despite healthy growth in air passenger traffic and improvement in yields, the movement of the latter will remain monitorable amid elevated ATF prices and depreciation of the

INR

vis-à-vis the

USD

over pre-Covid levels, both of which have a major bearing on the airlines’ cost structure,” ICRA noted.
The average ATF price stood at Rs. 103,499/KL in FY2024, lower by 14% than Rs. 121,013/KL in FY2023. In H1 FY2025, the average ATF price was Rs. 98,485/KL, similar on a year-over-year basis; however, it was higher by 51% compared to the pre-Covid level. Fuel costs account for about 30-40% of the airlines’ expenses, while about 45-60% of the operating expenses—including aircraft lease payments, fuel expenses, and a significant portion of aircraft and engine maintenance expenses—are denominated in dollar terms. Furthermore, some airlines have foreign currency debt.
“While domestic airlines have a partial natural hedge to the extent of their earnings from international operations, overall, their net payables are in foreign currency. The airlines’ efforts to ensure fare hikes, proportional to their input cost increases, will be key to expanding their profitability margins,” it stated.