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Airlines in India expected to report net loss of INR 5,000-7,000 cr in FY24: ICRA

Indian airlines are expected to see a sharp drop in net losses to INR 5,000-7,000 crore this fiscal as they continue to witness healthy passenger traffic growth and improvement in their revenue, rating agency ICRA said on Thursday.

The net loss would be much lower compared to the INR 11,000-13,000 crore loss the industry is estimated to have reported for 2022-23 due to elevated aviation turbine fuel prices, coupled with depreciation of the rupee against the US dollar, it said.

The airlines have improved the cost of available seat kilometre to the cost of available seat kilometre (RASK-CASK) spread through better pricing discipline, it said.

According to the rating agency, the domestic aviation industry continues to face challenges despite witnessing a healthy recovery in air passenger traffic because of sequential increase in aviation turbine fuel (ATF) prices and depreciation of the value of rupee against the US Dollar.

It said domestic air passenger traffic rose 26 per cent to around 1.22 crore in July as compared to 97 lakh in the same month last year.

The outlook for the aviation sector is stable, on the back of fast-paced recovery in the previous fiscal and expectations of the trend continuing in 2023-24, ICRA said.

(Last fiscal’s losses) were much lower than the net loss of INR 23,500 crore in 2021-22 and ICRA’s earlier estimated net loss of INR 15,000-17,000 crore for 2022-2023, driven by improved ability of airlines to shore up yields without impacting demand,” it said.

The net loss is expected to reduce further to INR 5,000-7,000 crore in 2023-24 as airlines continue to witness healthy passenger traffic growth and improve their RASK-CASK spread through better pricing discipline, ICRA said.
The trend is expected to continue as the industry regains some pricing discipline, coupled with year-on-year decline in ATF prices since April compared to the last fiscal, ICRA said.

The average ATF prices were at INR 95,906/kilo litre in the first five months of this financial year as against INR 1,21,013/kilo litre in FY23 and Rs 64,715/kilo litre in FY2020, according to ICRA.

Further, some airlines have foreign currency debt, ICRA said, adding that while domestic airlines have a partial natural hedge to the extent of earnings from their 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 the key to expanding their profitability margins, it said.

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