scorecardresearchAviation sector sees a healthy rebound but rising ATF prices remain a concern: ICRA

Aviation sector sees a healthy rebound but rising ATF prices remain a concern: ICRA

Updated: 10 May 2022, 09:41 AM IST
TL;DR.

  • The airlines’ capacity deployment for April 2022 was nearly 36 percent higher than April 2021 (81,777 departures in April 2022 against 59,967 departures in April 2021).

ICRA added that on a sequential basis, the number of departures in April 2022 were higher by around 2 percent, given the near normalcy seen in business operations. Photo Credit: Pixabay

ICRA added that on a sequential basis, the number of departures in April 2022 were higher by around 2 percent, given the near normalcy seen in business operations. Photo Credit: Pixabay

After the waning of Covid-19 infections, domestic passenger traffic has grown nearly 83 percent on a year-on-year (YoY) basis to nearly 10.5 million in April 2022 and is only about 5 percent lower compared to about 11 million in April 2019 (pre-Covid level), said rating agency ICRA in a note.

The airlines’ capacity deployment for April 2022 was nearly 36 percent higher than April 2021 (81,777 departures in April 2022 against 59,967 departures in April 2021).

ICRA added that on a sequential basis, the number of departures in April 2022 was higher by around 2 percent, given the near normalcy seen in business operations. However, sequentially, the domestic passenger traffic in April 2022 was almost flat compared to about 10.7 million in March 2022.

“For April 2022, the average daily departures were at nearly 2,726, notably higher than the average daily departures of about 2,000 in April 2021, and higher compared to nearly 2,588 in March 2022. The average number of passengers per flight during April 2022 was at 128, against an average of 133 passengers per flight in March 2022 and lower than an average of 135 passengers per flight in April 2019," said Suprio Banerjee, Vice President and Sector Head, ICRA said.

"Though recovery in passenger traffic is expected to be relatively fast-paced in FY23, given the near normalcy situation seen in domestic airline operations, overhang of any further Covid wave looms on the sector. Elevated ATF prices aggravated by geopolitical issues will remain a near-term challenge for the industry and will continue to weigh on the profitability of Indian carriers,” said Banerjee.

With the resumption of scheduled international operations since March 27, 2022, and reversion to bilaterally-agreed capacity entitlements, the international passenger traffic for Indian carriers in April 2022 surged to about 1.85 million, which also marginally surpassed the international passenger traffic of ~1.83 million witnessed in April 2019 (pre-Covid level).

ATF prices have surged nearly 89 percent on a YoY basis in May 2022 given the elevated crude oil prices, due to geopolitical issues arising from the Russian invasion of Ukraine.

The rising ATF prices will pose a serious threat to the industry earnings in FY23. On an aggregate basis, a return to normalcy will lead to a recovery in passenger load factors, which in turn will aid revenues; however, elevated ATF prices will continue to weigh on the earnings of Indian carriers in FY23, ICRA said.

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We explain here domestic passenger growth & passenger load factor in Indian aviation.
First Published: 10 May 2022, 09:41 AM IST