Sunday, September 18, 2022

High ATF prices to slow down recovery in aviation industry, domestic airlines to remain under pressure

Domestic airlines have been increasing yields, but the same has not been adequate to offset the impact of the rising ATF prices, according to ICRA. However, a quick recovery in domestic passenger traffic is expected in FY23, helped by normalcy in operations and the waning pandemic. “The earnings recovery for domestic airlines, however, will be slow-paced due to elevated ATF prices in addition to the rupee depreciation against the US$ amid a heightened competitive environment,” ICRA said in its report. The ratings agency continues to maintain a negative outlook on the industry as the financial performance of Indian air carriers is likely to remain under pressure in the near term, even as recovery in domestic passenger traffic has been healthy.

India’s aviation industry continues to witness recovery, with domestic passenger traffic for August 2022 estimated at around 102 lakh, around 5% higher compared to 97 lakh in July and 52% higher in comparison to the domestic passenger traffic recorded in the same period last year. Despite the recovery, the traffic fell short by 14%, compared to pre-Covid levels recorded in August 2019. For April-August, domestic passenger traffic is estimated at around 524 lakh, a 131% on year-growth. Even after more than 100% surge in these five months, the air traffic remains 11% lower compared to what it was pre-pandemic in April-August 2019. 

18/09/22 Namit Mahajan/Financial Express

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