Indian Aviation Industry to witness max passenger traffic growth amidst profitability pressure, says ICRA

New Delhi [India], Mar 8 (ANI): Credit rating agency ICRA has said that the Indian Aviation Industry is likely to report 22 to 23 percent passenger traffic growth in FY2017 supported by ongoing low airfare regime says ICRA in its report. The airlines are maintaining healthy PLFs backed by low airfares. However, since the ATF prices have been on an uptrend during the year, the impact on profitability of the airlines during Q4 FY2017 is inevitable as average ATF prices during the quarter are 37.9 percent higher YoY, while the yields continue to remain under pressure. As per ICRA estimates, the fuel cost per ASKM (CASK) of the domestic aviation industry increased to Rs. 1.16 in January 2017 from a low of Rs. 0.82 in February 2016, and the same is expected to increase further in February and March 2017. "The Indian Aviation industry has reported YoY passenger traffic growth of 23.2 percent during 10m FY2017 period and the industry is heading towards completing one of the best years in terms of passenger traffic growth. The domestic passenger growth for last five years stood at 12.9 percent, 5.3 percent, 4.6 percent, 15.5 percent and 22.1 percent and the industry is likely to surpass the last year growth rate, notably on a higher base. The traffic growth performance has also been one of the best amongst other key aviation markets in the world," said AVP and Associate Head Corporate Sector ratings ICRA, Anand Kulkarni. The domestic passenger traffic growth during the month of January 2017 stood healthy at 25.3 percent. The YoY traffic growth on international routes for the industry was moderate at 8.8 percent; however, the Indian carriers outperformed the industry growth, with 17.8 percent YoY growth in traffic. The year started with low aviation turbine fuel (ATF) prices regime carried forward from the previous fiscal, which had provided room for the airlines to reduce airfares. The lower airfares were also a result of increasing competitive intensity due to addition of new players and expansion of capacities by incumbents as well as new entrants. The domestic industry capacity (measured in available seat kilometers - ASKMs) reported 20.6 percent YoY growth during 10m FY2017 as per ICRA estimate. Except Air Costa and Air Pegasus (which halted operations since August 2016), all the airlines reported capacity growth during the year. Further, outstanding order backlog of various Indian airlines underlines healthy future capacity addition. Backed by competitive pricing, the industry reported stellar passenger load factor (PLF) of 84.4 percent during 10m FY2017, which is also one of the best amongst the key markets in the world. The PLF stood at 88.3 percent during January 2017. In the domestic market, Indigo continued to enjoy the leadership position with a market share of 40.1 percent during 10m FY2017 and is on the path to complete successive fifth year of leadership position as well as achieve ~40 percent market share by any carrier for the first time during the last eight fiscal years. Other key players like Jet Group and Air India Group continue to concede market shares, while the new airlines, Vistara and AirAsia, reported gradual expansion in their market shares to 2.7 percent and 2.5 percent, respectively, during 10m FY2017. (ANI)