Aviation industry’s losses to fall significantly in FY24 on traffic growth: ICRA

NEW DELHI:  Domestic aviation industry is estimated to report a significantly lower net loss of Rs 3,000-5,000 crore in the financial year 2023-24 (FY24) as against an estimated Rs 17,000-17,500 crore net loss in FY23, rating agency ICRA said on Thursday in its mid-year review of the sector. 

This projection comes as domestic air passenger traffic is likely to witness an 8-13% year-on-year (YoY) growth in FY24 to reach 150-155 million, thereby surpassing pre-Covid levels. ICRA noted that the industry witnessed a better pricing power, as reflected in improved yields and thus the revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) spread of the airlines.

The pricing power is expected to continue with a YoY fall in aviation turbine fuel (ATF) prices since April 2023 (notwithstanding a recent uptick) and relatively stable foreign exchange rates. The improvement in yields for the airlines, however, will remain monitorable amid elevated ATF prices and depreciation of rupee vis-à-vis the US dollar as compared to pre-COVID levels, both of which have a major bearing on the airlines’ cost structure. 

The average ATF prices stood at `98,892/KL in the first six months of FY24, 53% higher compared to an average of `64,715/KL during FY20, albeit a fall of 18% compared to `121,013 /KL in FY23. Fuel accounts for 30-40% of the airlines’ expenses, while 35-50% of the airlines’ operating expenses.

Industry sees better pricing power
ICRA noted the industry witnessed a better pricing power, as reflected in improved yields and thus the revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) spread of the airlines. The pricing power is expected to continue with a YoY fall in ATF prices since April 2023 (notwithstanding recent uptick) and relatively stable foreign exchange rates

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