Sunday, June 23, 2024

Indian Airlines Forecasted To Cut Net Losses To INR 5,000-7,000 Crore, Fuelled By Passenger Growth & Improved Revenue: ICRA Report

By Staff Correspondent

Indian airlines are forecasted to significantly trim their net losses to Rs 5,000-7,000 crore in the current fiscal year, as the industry benefits from a robust increase in passenger traffic and improved revenue streams, according to a report released by credit rating agency ICRA on Thursday.

The anticipated reduction in net loss contrasts sharply with the Rs 11,000-13,000 crore losses estimated for the previous fiscal year, 2022-23, driven largely by elevated aviation turbine fuel (ATF) costs and the depreciation of the Indian rupee against the US dollar.

Positive Industry Outlook Amid Challenges

ICRA’s report offers a stable outlook on the Indian aviation sector, reflecting the rapid recovery observed during the preceding fiscal year and projecting this trend to continue into 2023-24. The anticipated net loss for the coming year is a significant decline from the Rs 23,500 crore recorded in 2021-22.

Despite this positive trajectory, the domestic aviation sector faces headwinds, particularly from successive hikes in ATF prices and ongoing currency devaluation. Airlines have, however, managed to navigate these challenges, boosting the cost of available seat kilometre to the cost of available seat kilometre (RASK-CASK) spread through improved pricing discipline.

Traffic Growth & Pricing Discipline

ICRA Airlines’t domestic air passenger traffic rose by 26% to roughly 1.22 crore passengers in July, compared to 97 lakh in the same month last year. This traffic growth, coupled with airlines’ ability to enhance yields without negatively affecting demand, contributed to a more favourable RASK-CASK spread, which in turn is expected to drive the projected net loss reduction to Rs 5,000-7,000 crore in the fiscal year 2023-24.

Furthermore, the industry is benefiting from a year-on-year decrease in ATF prices since April, a notable shift from the previous fiscal year.

Recovery In Earnings & Fare Hikes

ICRA pointed out that the recovery in earnings has been gradual, and some airlines with foreign currency debt will need to carefully manage their net liabilities in foreign currency. The rating agency emphasised the importance of airlines implementing fare hikes in proportion to input cost increases to enhance their profitability margins.

The report by ICRA is seen as a significant indicator of the direction of the Indian aviation industry, reflecting both the resilience shown in recovery and the ongoing challenges that must be addressed. As the market continues to evolve, with both opportunities and headwinds, the ability of Indian airlines to maintain pricing discipline and manage fuel cost fluctuations will likely play a central role in shaping the sector’s financial health and growth trajectory.

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