As per the projections by the Investment Information and Credit Rating Agency of India (ICRA), the Indian aviation industry is expected to suffer a net loss in the range of Rs 250 to 260 bn in the current financial year. Despite a year-on-year growth in passenger traffic, both domestic and international passengers, carried by Indian carriers, the growth will be significantly lower than the FY2013 and FY2016 levels.
The report expects strong YoY growth of 45-50% in domestic passenger traffic and 80-85% in international passenger traffic for Indian carriers in FY2022, on a low base; however, these will still be lower than FY2016 and FY2013 levels, respectively.
The demand recovery in domestic air passenger traffic will depend largely on factors like the pace of vaccination, willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, which in turn impacts consumer sentiments and the ability to travel, Central and various state government-mandated travel restrictions and quarantine norms, and recovery in business travel.
According to Kinjal Shah, Vice President and Co-Group Head, ICRA Limited, the recovery in passenger traffic will only be gradual, with the domestic passenger traffic expected to reach pre-Covid levels only by FY2024. Elevated ATF prices …higher by 71% on a Y-o-Y basis in 5M FY2022… and fare caps continue to pose a challenge for the profitability of the airlines. The debt levels will remain high for the industry and are estimated to increase to Rs 1200 bn, including lease liabilities in FY2022, with the industry requiring additional funding of Rs. 450-470 bn over FY2022 to FY2024.
The impact of the pandemic will be more profound and long-lasting on international travel compared to domestic travel. In addition, to the above factors determining the recovery in passenger traffic, the recovery in international travel is also contingent on the opening up of scheduled international operations by the Government of India, the macroeconomic shock to the global economy, and the Government-mandated travel restrictions and quarantine norms of various countries.
