New Delhi, Dec 24 (Mayank Nigam) Domestic airlines could together report a net loss of Rs 2,000-3,000 cr in financial year 2024-25 (FY25) and 2025-26 (FY26) each as they face yield pressure amid elevated jetfuel prices, research and rating firm ICRA said in a report on Tuesday. The report said the outlook for the Indian aviation industry remains stable, driven by expectations of moderate growth in domestic air passenger traffic and a relatively stable cost environment in FY25. “The pace of recovery in industry earnings is likely to be gradual, owing to the high fixed cost nature of the business. ICRA expects the Indian aviation industry to report a net loss of Rs 20-30 billion (Rs 2,000-3,000 crore) in FY2025 and FY2026 compared to a net profit of Rs. 16 billion (1,600 crore) in FY2024 due to anticipated pressure on yields as airlines strive to maintain adequate PLF (passenger load factor) amid continued elevated ATF prices,” it said.
The rating agency further said that the higher borrowing costs due to increased lease liabilities with the scheduled aircraft deliveries for select airlines is likely to increase the interest burden. “Nonetheless, the expected losses are significantly lower than losses of Rs 235 billion and Rs 174 billion reported in FY2022 and FY2023, respectively. The industry debt metrics in FY2025 are likely to remain range-bound, with interest coverage of 1.5-2.0x times,” it stated. As per ICRA, domestic air passenger traffic in the first eight months of the current fiscal (April–November 2024) was 1,074.9 lakh, a year-on-year growth of 6.7%. In the first seven months of FY25, the international passenger traffic for Indian carriers stood at 190.3 lakh, a YoY growth of 15.9%.
For November 2024, domestic air passenger traffic is estimated at 144.9 lakh, 6.1% higher than 136.6 lakh in October 2024. In its report, ICRA said that supply chain challenges and engine failure issues impacted the industry capacity over the last 18 months and are expected to continue affecting it this year. “In FY2024, Go Airlines (India) Limited grounded half of its fleet due to faulty P&W engines, thus stalling its operations. InterGlobe Aviation Limited (IndiGo) also had more than 70 aircraft grounded as on September 30, 2024, due to the P&W engine issue, including the powder metal (used to manufacture certain engine parts) contamination factor with its P&W fleet,” ICRA said. Overall, the Indian aviation industry had 144 aircraft for select airlines grounded as on September 30, 2024, which is 16-18% of the total industry fleet, thus impacting the overall industry capacity (as measured by available seat kilometre or ASKMs).