India's aviation industry is set to incur losses worth ₹3,000-4,000 crore in FY2024-25, similar to the losses seen in FY2023-24, ratings agency ICRA has said. The losses expected in FY25 are significantly lower than FY23 when the domestic aviation industry reported a net loss of ₹17,000-17,500 crore due to elevated aviation turbine fuel (ATF) prices, twined with the depreciation of the INR against the USD.

India's domestic passenger traffic reported around 3% year-on-year growth in April 2024 with the air passenger traffic estimated at 132.8 lakh. Domestic air traffic registered a 0.6% degrowth in April 2024 compared to 133.7 lakh in March 2024 but surged 21% as compared to pre-COVID levels, ICRA's domestic passenger traffic data report for April 2024 shows.

For the full fiscal year FY2024, the domestic air passenger traffic, in line with estimates, was around 154 million, with a YoY growth of around 13%, says the ratings agency. The domestic air passenger traffic in FY24, thus, surpassed the pre-Covid levels of around 142 million in FY20.

The airlines’ capacity deployment in April 2024 was higher by 2% than that of April 2023 but was lower by 3% over March 2024.

For the fiscal year FY2024, the international passenger traffic for Indian carriers stood at around 296.8 lakh, a YoY growth of 24%, and higher than the pre-COVID levels of 227.3 lakh by 30%. The international traffic for Indian carriers in FY2024 also surpassed the peak levels of around 259 lakh in FY2019 (April–March 2019), the report adds.

In its outlook for the aviation sector, ICRA says the aviation industry is "stable", and has seen "continued recovery" in domestic and international air passenger traffic, with a relatively stable cost environment and expectations of the trend continuing in FY2025. 

"The industry witnessed improved pricing power, reflected in the higher yields (over pre-COVID levels) and, thus, the revenue per available seat kilometre–cost per available seat kilometre (RASK–CASK) spread of the airlines. The momentum in air passenger traffic witnessed in FY2024 is expected to continue into FY2025, though further expansion in yields from the current levels may be limited," says ICRA.

Among the challenges, the ICRA report finds that "supply chain challenges and issues of engine failures the Pratt and Whitney (P&W) engines" have impacted the industry. "In FY2024, Go Airlines (India) Ltd grounded half of its fleet due to faulty P&W engines, leading to the stalling of its operations. IndiGo also grounded more than 70 aircraft due to P&W engine issues. Around 24-26% of the total fleet of Indian airlines in operations was grounded by March 31, 2024."

Another major issue facing the industry is the availability of pilots and cabin crew, which has led to several flight cancellations and delays. Notably, in April 2024, Vistara had to cancel some of its scheduled flights, with many experiencing delays as well, due to a shortage of cabin crew and pilots. Further, on May 8, 2024, Air India Express had to cancel over 100 flights due to similar reasons. “Such issues impact the capacity availability and add to customer grievances,” says ICRA.

Additionally, select airlines are also facing financial distress and stretched liquidity issues. "With half of Go Airlines (India) Limited’s fleet grounded due to faulty P&W engines, it faced payment defaults with vendors, aircraft lessors and financial creditors," ICRA adds.

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