Domestic air passenger traffic surges 5.1% YoY in May, exceeds pre-COVID levels: ICRA Report

Domestic air passenger traffic in India experienced a notable increase of 5.1% year-on-year in May, reaching an estimated 138.9 million passengers, according to credit ratings agency ICRA.

This figure is significantly higher, by approximately 14%, than pre-COVID levels. ICRA attributes the stable outlook for the Indian aviation industry to the ongoing recovery in both domestic and international passenger traffic, a relatively stable cost environment, and the expectation of continued growth into FY2025.

Domestic air traffic surge

In May, airlines' capacity deployment rose by 6% year-on-year and was about 2% higher than in April 2024. For FY24, domestic air passenger traffic was around 154 million, marking a year-on-year growth of approximately 13% and surpassing the pre-COVID level of 142 million in FY2020. International passenger traffic for Indian carriers also saw a robust year-on-year growth of around 24%, reaching approximately 29.68 million passengers in the last fiscal year.

The industry has benefited from improved pricing power, reflected in higher yields compared to pre-COVID levels. Despite this, ICRA cautions that further expansion in yields from current levels may be limited.

Average aviation turbine fuel (ATF) prices stood at Rs 103,499 per kiloliter in FY2024, which is 14% lower than the Rs 121,013 per kiloliter in FY2023, but significantly higher by 58% compared to the pre-COVID levels of Rs 65,368 per kiloliter in FY2020. In the first quarter of FY2025, average ATF prices were 5.4% higher year-on-year, although they declined by 6.5% sequentially in June 2024.

Fuel costs account for 30-40% of airlines' expenses, with around 45-60% of operating expenses, including aircraft lease payments and maintenance, denominated in dollars. The industry reported a net loss of approximately Rs 170-175 billion in FY2023 due to high ATF prices and rupee depreciation against the US dollar. ICRA forecasts a reduced net loss of around Rs 30-40 billion for FY2025, reflecting healthier passenger traffic growth and sustained pricing discipline.

[With PTI inputs]

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