As per the ICRA report, Indian aviation industry is likely to report 22-23% passenger traffic growth in FY2017 supported by ongoing low airfare regime. The airlines are maintaining healthy passenger load factor (PLF) backed by low airfares. However, since the aviation turbine fuel (ATF) prices have been on an uptrend during the year, the impact on profitability of the airlines during Q4 FY2017 is inevitable as average ATF prices during the quarter are 37.9% higher YoY, while the yields continue to remain under pressure.
As per ICRA estimates, the fuel cost per ASKM (CASK) of the domestic aviation industry increased to INR 1.16 in January 2017 from a low of INR 0.82 in February 2016, and the same is expected to increase further in February and March 2017.
According to Anand Kulkarni, AVP and Associate Head, Corporate Sector ratings, ICRA limited, “The Indian Aviation industry has reported YoY passenger traffic growth of 23.2% during 10m FY2017 period and the industry is heading towards completing one of the best years in terms of passenger traffic growth. The domestic passenger growth for last five years stood at 12.9%, 5.3%, 4.6%, 15.5% and 22.1% and the industry is likely to surpass the last year growth rate, notably on a higher base. The traffic growth performance has also been one of the best amongst other key aviation markets in the world.”
The domestic passenger traffic growth during January 2017 stood healthy at 25.3%. The YoY traffic growth on international routes for the industry was moderate at 8.8%; however, the Indian carriers outperformed the industry growth, with 17.8% YoY growth in traffic.
The year started with low ATF prices regime carried forward from the previous fiscal, which had provided room for the airlines to reduce airfares. The lower airfares were also a result of increasing competitive intensity due to addition of new players and expansion of capacities by incumbents as well as new entrants. The domestic industry capacity (measured in available seat kilometers – ASKMs) reported 20.6% YoY growth during 10m FY2017 as per ICRA estimate. Except Air Costa and Air Pegasus (which halted operations since August 2016), all the airlines reported capacity growth during the year. Further, outstanding order backlog of various Indian airlines underlines healthy future capacity addition.
Backed by competitive pricing, the industry reported stellar PLF of 84.4% during 10m FY2017, which is also one of the best amongst the key markets in the world. The PLF stood at 88.3% during January 2017.
In the domestic market, Indigo continued to enjoy the leadership position with a market share of 40.1% during 10m FY2017 and is on the path to complete successive fifth year of leadership position as well as achieve 40% market share by any carrier for the first time during the last eight fiscal years. Other key players like Jet Group and Air India Group continue to concede market shares, while the new airlines, Vistara and AirAsia, reported gradual expansion in their market shares to 2.7% and 2.5%, respectively, during 10m FY2017.