With only a marginal increase in domestic air passenger traffic this fiscal and increasing prices of fuel the Indian aviation sector may be heading toward some turbulence.
“While on one hand, the passenger traffic growth is witnessing moderation on the back of increased efforts by airlines to strengthen the yields, on the other, the Aviation Turbine Fuel (ATF) prices are on a sequential uptrend from August 2017 to October 2017,” said Kinjal Shah, VP and Co-Head, Corporate Sector Ratings, ICRA.
The domestic passenger traffic growth remained range-bound during the current fiscal as reflected in 16.2% Y-o-Y growth during five months in FY18.
“This is marginally higher than Y-o-Y traffic growth of 15.7% for the month of August 2017 which in turn was slightly better as compared to the previous month,” ICRA said.
Spelling out efforts to curb expenses, Shah added, “In such a scenario, the industry might need to relook at various strategies including pricing, discounting and cost efficiency measures. Though moderate capacity addition on the domestic routes in the current fiscal has supported the Passenger Load Factors (PLFs) of the airlines, any acceleration in the capacity addition will intensify the competition , thereby putting pressure on profitability of the airlines.”