ICRA Predicts Significant Drop In FY24 Net Loss For Domestic Aviation Sector

New Delhi, Sept 9 (KNN) Rating agency ICRA in a report forecasted a Sharp Reduction in Domestic Aviation Industry's Net Loss for FY24, Estimated at Rs 3,000-5,000 Crore, Compared to Rs 17,000-17,500 Crore in FY23.

This projection comes as domestic air passenger traffic is likely to witness an 8-13 per cent year-on-year (YoY) growth in FY24 to reach 150-155 million, thereby surpassing pre-Covid levels. 

ICRA highlighted that the industry experienced enhanced pricing capabilities, evident through improved yields and a wider revenue per available seat-kilometer minus cost per available seat-kilometer (RASK-CASK) margin for airlines

The pricing power is expected to continue with a YoY fall in aviation turbine fuel (ATF) prices since April 2023 (notwithstanding a recent uptick) and relatively stable foreign exchange rates. 

The improvement in yields for the airlines, however, will remain monitorable amid elevated ATF prices and depreciation of rupee vis-à-vis the US dollar as compared to pre-COVID levels, both of which have a major bearing on the airlines’ cost structure. 

The average ATF prices stood at `98,892/KL in the first six months of FY24, 53 per cent  higher compared to an average of `64,715/KL during FY20, albeit a fall of 18 per cent compared to `121,013 /KL in FY23. Fuel accounts for 30-40 per cent of the airlines’ expenses, while 35-50 per cent of the airlines’ operating expenses.

Industry sees better pricing power ICRA noted the industry witnessed a better pricing power, as reflected in improved yields and thus the revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) spread of the airlines. The pricing power is expected to continue with a YoY fall in ATF prices since April 2023 (notwithstanding recent uptick) and relatively stable foreign exchange rates.  (KNN Bureau)