Domestic air traffic surges 8.6% to 1.31 cr in July

India's domestic air passenger traffic for July 2024 is estimated at 1.31 crore in July 2024, a YoY growth of 8.6% compared to 1.21 crore in July 2023 and higher by 10% than pre-COVID levels of 1.19 crore in July 2019, according to the latest report shared by ratings agency ICRA.

For April 2024 to July 2024 (4M FY25), domestic air passenger traffic was 5.33 crore, a YoY growth of 5.2% against 5.06 crore in the year-ago period. In Q1 FY25, the international passenger traffic for Indian carriers stood at 8.05 crore, up 16.7% YoY against 6.89 cr in the year-ago period.

The airlines’ capacity deployment in July 2024 was higher by 5% than that of July 2023 and marginally higher by 0.2% over June 2024. "The domestic aviation industry operated at a passenger load factor (PLF) of 87% in July 2024 against 84% in July 2023. In July and August 2024, ATF rose marginally by 0.6% and 0.9%, respectively, sequentially. From April 2024 till July 2024, the prices were higher by 3.1%, 6.4%, 6.7% and 4.9%, respectively, YoY. In August 2024, the prices were lower by 2.2% YoY," says the ratings agency.

The ICRA report highlights the industry is facing supply chain challenges and issues of engine failures for the Pratt and Whitney (P&W) engines supplied to airlines. "While some airlines have adequate liquidity or financial support from a strong parent supporting their credit profiles, the credit metrics and liquidity profile of others will remain under stress over the near term."

ICRA says there's a continued recovery in domestic and international air passenger traffic. In the wake of a stable cost environment, ICRA expects the trend to continue in FY2025 and has given a 'stable' outlook. "The industry witnessed improved pricing power, reflected in the higher yields (over pre-Covid levels) and, thus, the revenue per available seat kilometre–cost per available seat kilometre (RASK–CASK) spread of the airlines. The momentum in air passenger traffic witnessed in FY2024 is expected to continue into FY2025, though further expansion in yields from the current levels may be limited," the ratings agency says.

On the pace of recovery in the Indian aviation space, ICRA says it is likely to be "gradual" due to the high fixed-cost nature of the business. ICRA expects the Indian aviation industry to report a similar net loss of ₹3-4,000 crore in FY2025 as seen in FY2024, significantly lower than the level of ₹170-17,500 crore in FY2023, as airlines continue to witness healthy passenger traffic growth and maintain pricing discipline.