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Informist, Tuesday, Dec. 24, 2024

 

MUMBAI – Indian airline companies are likely to report annual net losses in the region of INR 20-30 billion in the current financial year ending March and next year as they struggle to maintain the plant load factor amid higher jet fuel prices, according to rating agency ICRA. Some Indian airlines will face higher borrowing costs on the back of increased lease liabilities as they are slated to receive new aircraft, ICRA said in a report on Tuesday. 

 

India's aviation industry reported a net profit of INR 16 billion in FY24 after posting net losses of INR 174 billion in FY23 and INR 235 billion in FY22. ICRA said it has a stable outlook on the aviation industry, driven by expectations of moderate growth in domestic air passenger traffic and a relatively stable cost environment in FY25.

 

The pricing power of aviation companies has improved this financial year compared to FY24, which is evidenced by higher yields and revenue per available seat kilometre-cost per available seat kilometre spread, the rating agency said. In FY25, air passenger traffic growth is expected to moderate to 7-10% from 13% in FY24. Air passenger traffic growth in Apr-Sept was impacted by severe heatwaves and other weather-related disruptions, the rating agency said.

 

Aviation companies have also been impacted by supply chain snags over the last 18 months. ICRA expects these issues to sustain for the rest of the current financial year. Go Airlines (India) shut its operations in FY24 owing to failure in engines supplied by Pratt and Whitney. Interglobe Aviation Ltd.'s IndiGo airlines has over 70 aircraft grounded as of Sept. 30 due to a similar issue. Overall, around 144 aircraft of the Indian aviation industry remained grounded as of Sept. 30, around 16-18% of the total industry fleet.

 

The rating agency said the cost structure of airlines could come under pressure due to elevated aviation turbine fuel prices compared to pre-COVID levels even as the rupee continued to depreciate against the US dollar. Fuel costs account for around 30-40% of airlines' expenses, while around 33-50% of the operating expenses like aircraft lease payments and aircraft and engine maintenance expenses are in dollar terms. On Tuesday, the rupee ended at a record low of 85.20 against the US dollar.

 

The average jet fuel price was at INR 95,686 per kilolitre in Apr-Dec, down 7.7% lower on year but 47% higher compared to pre-COVID years, ICRA said. End

 

Reported by Anand JC

Edited by Saji George Titus

 

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