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Indian aviation sector to log 8-13 pc passenger traffic growth in FY24: ICRA

ICRA, the credit rating agency, forecasted an 8 to 13 percent growth in Indian air passenger traffic for the fiscal year 2024, reaching between 150 to 155 million and exceeding the pre-pandemic figure of 141.2 million recorded in FY20. The agency has expressed a stable outlook for the Indian aviation sector, thanks to the ongoing recovery in both domestic and international passenger numbers and a relatively stable cost scenario.

The agency anticipates that the growth momentum will persist into FY2025, with a similar annual increase expected. This optimism is underpinned by increasing demand for both leisure and business travel, coupled with enhancements in airport infrastructure.

For FY2023, international traffic for Indian carriers already went beyond pre-Covid levels, though it did not reach the FY2019 high of 25.9 million. ICRA predicts this number will surpass the previous peak in the current fiscal year, with an estimated 25 to 27 million passengers, marking a year-on-year increase of 7 to 12 percent. This growth trend is likely to continue into FY2025, with passenger numbers projected to reach between 27 to 29 million.

Suprio Banerjee, Vice-President and Sector Head of Corporate Ratings at ICRA, remarked on the improved financial health of the industry, highlighted by rising yields which have enhanced the revenue-cost margin for airlines. This favourable situation is expected to persist, supported by decreasing aviation turbine fuel (ATF) prices and stable foreign exchange rates. Consequently, the sector’s net loss is projected to significantly drop to INR 30-40 billion in FY2024 and FY2025 from about INR 170-175 billion in FY2023.

ATF prices and the rupee-dollar exchange rate significantly impact airline costs. The average ATF price saw a 15 percent year-on-year decrease to INR 103,547 per kilolitre in the first 11 months of FY2024, down from INR 120,978 per kilolitre in FY2023, yet this figure was 60 percent higher than the FY2020 average. Fuel constitutes approximately 30-40 percent of airline expenses, with a significant portion of operating costs, including aircraft leases and maintenance, denominated in dollars. The Indian aviation industry’s current order book stands at around 1,700 aircraft, more than double the size of the current fleet, indicating robust growth prospects.

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