Tag Archives: ICRA

Healthy passenger load factors (PLFs) supported by a decline in competitive intensity due to moderation in capacity addition and suspension of operations of three regional airlines has augured well for the industry profitability. This coupled with a gradual improvement in the core growth drivers like economic environment, tourism demand and regulatory support and a strong demand during the peak season is expected to support the industry profitability during H2 FY2018. Improved tourism demand, policy measures like the National Civil Aviation Policy and the Regional Connectivity Scheme and start of economic revival are the key positives for the industry. However, inadequate aviation infrastructure, which has constrained the performance of airlines, remains a bottleneck. According to Kinjal Shah, Assistant Vice President & Co-Head – Corporate Sector Ratings, ICRA, “The industry has done well to mitigate the impact of 8.7 per cent YOY increase in ATF prices during H1 FY2018. The increased ability of the airlines to pass on the costs to the customers due to reduced competitive intensity has resulted in an increase in the revenue per available seat kilometer (RASK)-cost per available seat kilometer (CASK) spread for the airlines, and the financial performance of most of the airlines improved during the current year.”

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.”