Domestic traffic growth undeterred by demonetisation: ICRA

According to ICRA, domestic air passenger traffic has been undeterred by demonetisation with a robust YoY growth of 24 per cent in December 2016. The growth was propelled by peak season demand along with prevalent low airfares due to intense competition. The traffic growth on international routes was however impacted slightly, with the industry reporting 7.7 per cent YoY growth during the month. Nevertheless, performance of Indian carriers on international routes was better than the industry, with 16.1 per cent growth in traffic. Domestic passenger traffic growth was healthy at 22.9 per cent during 9m FY2017.
Anand Kulkarni, AVP and Associate Head, Corporate Sector Ratings, ICRA Limited, “ICRA has been emphasising on pressure on profitability of airlines operating in the country due to competitive environment and increasing aviation turbine fuel (ATF) prices in the current fiscal and the same has been reflected in decline in profitability of the listed airlines in Q3 FY2017. As per ICRA estimates, the fuel cost per ASKM (CASK) of the domestic aviation industry increased to Rs. 1.08 in December 2016 from a low of Rs. 0.82 in February 2016 and the same is expected to increase further in Q4 FY2017. Going forward, the profitability of the airlines would be negatively impacted in Q4 FY2017 as the airline yields continue to remain under pressure and the ATF prices maintain the uptrend. The ATF prices in February 2017 are ~50 per cent higher on YoY basis. Further, the capacity addition in the industry is expected to continue at a healthy pace given the proposed fleet expansion plans of various airlines.”