Wednesday, December 20, 2017

Domestic air traffic growth may have peaked out: Crisil

Despite several policy decisions by the government, India's airlines are flying into two major headwinds - crippling infrastructure constraints at major airports, and an uptick in fuel prices - which could mean growth in domestic air passenger traffic may have peaked out for the medium term, according to a report by Crisil Research.

The report estimates "growth decelerating by 800 basis points (bps) to 13-15% annually in the five fiscals through 2022, compared with a blistering 22% seen in FY16 and FY17. This fiscal, it's seen slowing down by 300-500 bps to 17-19%."

Passenger traffic took off in the past two fiscals as fares fell, following a dip in crude oil prices to an average $48 per barrel in 2016, as against $108 a barrel in 2014. The fall also brought down the operating costs of carriers that end up exhausting 30-35% of their overall spends in aviation turbine fuel.

CRISIL Research expects the average price of crude oil to stand at $50-$55 a barrel over the next five fiscals. This means that air fares would rise and there would be moderate growth in passenger traffic.
20/12/17 Anirban Chowdhury/Economic Times