According to ICRA, rising fuel prices for aircraft turbines continue to pose a major threat to the recovery process due to ongoing geopolitical issues related to the Russia-Ukraine conflict
According to ICRA, rising fuel prices for aircraft turbines continue to pose a major threat to the recovery process due to ongoing geopolitical issues related to the Russia-Ukraine conflict
“It is estimated that April’s domestic passenger traffic grew 83% YoY to 10.5 million as COVID-19 cases eased, leaving a gap of just 5% compared to the pre-pandemic level,” said ICRA (formerly Investment Information and Credit Rating Agency of India Limited) on May 9. Indian airlines had flown around 11 million passengers in April 2019.
“Domestic airlines, however, saw international passenger traffic slightly surpass pre-pandemic numbers (around 1.83 million), with a total volume of around 1.85 million,” it said.
It also said that rising jet fuel (ATF) prices continue to emerge as a major threat to the recovery process due to ongoing geopolitical issues surrounding the Russia-Ukraine conflict.
In April 2022, average daily departures were around 2,726, significantly higher than average daily departures of around 2,000 in the same month last year and higher compared to around 2,588 in March 2022, said Suprio Banerjee, vice president and sector leader, ICRA.
According to him, the average number of passengers per flight in the previous month of April was 128 compared to 133 passengers per flight in March 2022 and lower than the average of 135 passengers per flight in April 2019.
“Although the recovery in passenger traffic is expected to be relatively rapid in fiscal 2023, given the near-normal situation in domestic flight operations, there is a risk of an overhang of further COVID waves in the sector,” added Mr. Banerjee.
“Increased ATF prices, exacerbated by geopolitical issues, will remain a near-term challenge for the industry and will continue to weigh on Indian airlines’ profitability,” he said.
“ATF prices are up around 89% year-to-date month-to-date amid elevated crude oil prices due to geopolitical issues surrounding the Russian invasion of Ukraine,” ICRA said.
“Rising ATF prices will pose a serious threat to industry earnings in fiscal 2023, it said, adding that a return to normal overall will lead to a recovery in passenger load factors, which in turn will support revenues. However, increased ATF prices will continue to weigh on Indian airlines’ revenues in fiscal 2023,” it said.
