Domestic air passenger traffic records 9% YoY growth in November; outlook for Indian aviation industry stable
Domestic air passenger traffic records 9% YoY growth in November; outlook for Indian aviation industry stable
The domestic air passenger traffic reached approximately 127.1 lakh in November 2023, indicating a marginal increase of around 0.6 per cent compared to 126.4 lakh recorded in October, according to a report released by the credit rating agency ICRA.
Further, it grew 9 per cent on an year-on-year (YoY) basis but was lower by 2 per cent than the pre-Covid levels (November 2019).
The cumulative domestic air passenger traffic for the first eight months of FY2024 (April-November 2023) reached a total of 1,007 lakh, representing a YoY growth of 17 per cent and 5 per cent higher than the pre-Covid levels (April-November 2019).
According to the report, the airlines’ capacity deployment in November 2023 was higher by 8 per cent than that of November 2022, but it was lower by 4 per cent in comparison to the pre-Covid levels (November 2019).
It is estimated that the domestic aviation industry operated at a passenger load factor (PLF) of 88 per cent in November 2023, against 88 per cent in November 2022 and 90 per cent in November 2019 (pre-Covid levels).
"Despite a healthy recovery in air passenger traffic, the domestic aviation industry continues to face challenges from elevated aviation turbine fuel (ATF) prices and depreciation of the INR vis-à-vis the USD compared to the pre-Covid levels, both of which have a major bearing on the airlines’ cost structure," the report noted.
It pointed that the average ATF prices stood at Rs 121,013/KL in FY2023 and Rs 103,668/KL in nine months of FY2024 compared to Rs 65,368/KL in FY2020. ATF prices, which were sequentially lower since April 2023, reversed their trajectory from July 2023 and also increased by 1.3 per cent on a YoY basis in October 2023. However, in November and December 2023, the ATF prices again declined sequentially. In December 2023, the ATF prices at 107,496/KL were lower by 4.6 per cent sequentially and by 10.5 per cent on a YoY basis.
Furthermore, the report noted that the e Indian aviation industry has been facing issues of engine failures for the Prat and Whitney (P&W) engines supplied to various airlines.
"In FY2023, Go Airlines (India) Limited grounded half of its fleet of aircrafts due to faulty P&W engines, which led to the stalling of its operations. InterGlobe Aviation Limited (IndiGo) has also grounded 40-plus aircraft due to P&W engine issues. IndiGo has also recently announced that aircraft in the range of mid-thirties would be incrementally grounded in Q4 FY2024 due to a powder metal (used to manufacture certain engine parts) contamination issue with its P&W fleet. Hence, on an overall basis the issue has been impacting the sectors capacity as a whole and will remain a near term challenge for the domestic aviation industry," the report said.
Having said that ICRA's outlook on the Indian aviation industry is stable on the back of the fast-paced recovery in domestic passenger traffic in FY2023 and eight months of FY2024 -- as well as the expectations of the trend continuing for the rest of FY24.
Moreover, the industry witnessed improved pricing power, reflected in the improved yields (over pre-Covid levels) and, thus, the revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) spread of the airlines.