Wednesday, September 19, 2018

Turbulent times for the Indian aviation industry

New Delhi: The domestic airlines industry, despite strong traction on growth, is facing challenging times. The industry is facing a double whammy with the increasing aviation turbine fuel (ATF) prices and the depreciation of the rupee against the dollar. Coupled with pressure on yields, this has aggravated the turbulence in the industry.

The domestic air passenger traffic has grown at a healthy compounded annual growth rate (CAGR) of 20.9% over FY2015-18. The growth trajectory has continued in the current year as well, with a robust year-on-year growth of 20.3% during 4M-FY2019. A healthy capacity addition of 16.9% during the period supported the growth to a large extent. With relatively low penetration levels, a favourable macroeconomic environment, support from the regulatory environment—i.e. the Regional Connectivity Scheme, or UDAN-RCS (Ude Desh ka Aam Naagrik)—and the development of new airports, ICRA expects that the domestic passenger traffic will continue to grow at a healthy pace (i.e. 15.5-16.5% per annum) over the medium term.

The industry’s capacity addition during FY2018 (available seat kilometres, or ASKM) was impacted by delays in aircraft deliveries on account of technical glitches with engines for the domestic market leader. The resolution of some of these technical problems has boosted the domestic capacity growth during the current year. ICRA estimates the domestic ASKM growth at about 18% in FY2019. The key drivers for the industry capacity growth continue to be the sizeable order book of airlines, which is in excess of 1,000 aircraft at present. Additional capacity deployment is also expected due to start of regional operations by IndiGo, Jet Airways and SpiceJet, as well as other regional carriers under the RCS phase I and II.
19/09/18 Financial Express

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