ATF prices in November 2022 are higher by 47 per cent on a YoY basis. While airlines have been increasing the yields, the same has not been adequate to offset the impact of the rising ATF prices, in ICRA’s view
Leading rating agency ICRA has forecast a negative business outlook for the Indian aviation sector while mentioning that the rising prices of aviation turbine fuel (ATF) and the general inflationary environment continue to stifle the industry earnings. ATF prices in November 2022 are higher by 47 per cent on a YoY basis. While airlines have been increasing the yields, the same has not been adequate to offset the impact of the rising ATF prices, in ICRA’s view.
ICRA expects the Indian aviation industry to report a net loss of close to INR 150-170 billion in FY 2023. The debt levels (including lease liabilities) are expected to be INR 1,000 billion in FY 2023. In the near term, the credit profile of Indian carriers will remain stressed until they are able to reduce their debt burden through a combination of improvement in operating performance and/or by way of equity infusion.
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In October 2022, Indian domestic air passenger traffic was estimated at 114 lakhs, 10 per cent higher compared to 103 lakhs in September 2022 primarily driven by pent-up demand during the festive season
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Further, it witnessed a YoY growth of 26 per cent, as October 2021 was yet to recover fully from the second wave of Covid-19
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It fell short by only eight per cent compared to pre-Covid levels in October 2019
“A quick recovery in domestic passenger traffic is expected in FY2023, aided by normalcy in operations and the waning pandemic. However, the earnings recovery for domestic airlines will be slow-paced due to elevated ATF prices in addition to the rupee depreciation against the USD amid a heightened competitive environment,” commented Suprio Banerjee, Vice President & Sector Head – Corporate Ratings, ICRA Limited.
In October 2022, Indian domestic air passenger traffic was estimated at 114 lakhs, 10 per cent higher compared to 103 lakhs in September 2022 primarily driven by pent-up demand during the festive season. Further, it witnessed a YoY growth of 26 per cent, as October 2021 was yet to recover fully from the second wave of Covid-19. It fell short by only eight per cent compared to pre-Covid levels in October 2019.
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