International Air Passenger Traffic To Witness 15-20% YoY Growth In FY2025; Global supply Chain Issues To Plague Industry Although the passenger traffic would be in the positive for the rest of FY25, the industry will still be plagued by global supply chain issues

The international passenger traffic growth for Indian carriers stood healthier at 16.2 per cent in H1 FY2025. This momentum is expected to continue for the rest of FY2025, reaching an estimated level of 34-36 million for the full year, representing a YoY growth of 15-20 per cent, said rating agency ICRA. Domestic air passenger traffic is forecasted to grow to 164-170 million in FY2025, reflecting a YoY growth of 7-10 per cent. However, the industry is still plagued by global supply chain issues that have affected the availability of aircraft, engine and parts, thus preventing airlines from ramping up capacity.

It is estimated that almost 144 aircraft i.e. 16-18 per cent of the total industry fleet as on September 30, 2024, have been grounded, thus affecting the overall industry capacity (as measured by available seat kilometres or ASKMs). The percentage of aircraft grounded has, however, reduced from 20-22 per cent in September 2023, the report added. The industry ASKM for the current fiscal has also been impacted due to challenges related to availability of pilot and cabin crew for select airlines, leading to several flight cancellations and delays. These have, therefore, resulted in increased operating expenses towards the cost of grounding, increased lease rentals due to additional aircraft being taken on lease, primarily wet lease, to offset the grounded capacity, rising lease rates and lower fuel efficiency (due to replacement by older aircraft taken on spot lease) – thus adversely impacting airlines' cost structure.

"ICRA expects the industry to report a net loss of INR 20-30 billion in FY2025 and FY2026 each, significantly lower than the losses witnessed in the past supported by improved pricing power of the airlines. The spread between revenue per available seat kilometre and cost per available seat kilometre (RASK-CASK) saw some moderation in H1 FY2025 over FY2024 due to higher fuel prices and overall increased costs amid grounding of aircraft, while yields moderated marginally as airlines strove to maintain adequate passenger load factors (PLFs). Nonetheless, the same is expected to pick up in H2 FY2025, amid healthy passenger traffic. The industry debt metrics in FY2025 are expected to remain stable, with interest coverage of 1.5-2.0x times," said Kinjal Shah, senior vice president & co- group head, ICRA.

As on September 30, 2024, the industry had a total fleet of 853 aircraft (including ~144 aircraft on ground). There are large aircraft purchase orders announced by various players in the industry and as per the indicative numbers, the total pending aircraft deliveries is around 1,660, which is almost double the current fleet in operations. "However, a large part of this is towards replacement of old aircraft with new fuel-efficient ones. ICRA believes that capacity addition for the industry will only be gradual as the supply chain challenges faced by the aircraft and engine OEMs may result in intermittent delays in deliveries," he added.