According to rating agency ICRA, Indian airlines forecast to see a substantial decline in net losses this fiscal, to INR 5,000–7,000 crore, as they continue to experience good passenger traffic growth and improvement in their income.

According to the analysis, the net loss would be considerably less than the INR 11,000–13,000 crore loss the industry is anticipated to have incurred for 2022–2023 as a result of rising aviation turbine fuel prices and the rupee’s devaluation against the US currency.

The cost of available seat kilometre to the cost of available seat kilometre (RASK-CASK) spread has been improved by the airlines, according to the statement.

The rating agency claims that despite a solid rebound in air passenger traffic, the domestic aviation industry still faces difficulties as a result of escalating aviation turbine fuel (ATF) prices and the rupee’s depreciation against the US dollar.

According to the report, domestic air passenger traffic increased 26% to almost 1.22 crore in July from 97 lakh in the same month last year.

According to ICRA, the forecast for the aviation industry is stable as a result of the previous fiscal’s quick recovery and expectations that the trend would continue in 2023–24.

Due to airlines’ increased capacity to support yields without affecting demand, (last fiscal’s losses) were significantly lower than the net loss of INR 23,500 crore in 2021–22 and ICRA’s prior forecast net loss of INR 15,000–17,000 crore for 2022–2023,” it said.

As long as airlines continue to see good passenger traffic growth and improve their RASK-CASK spread through improved pricing discipline, the net loss is predicted to further decline to INR 5,000–7,000 crore in 2023–24, according to ICRA.

According to ICRA, the trend is anticipated to continue as the industry regains some pricing discipline and ATF prices have been declining annually since April relative to the previous fiscal year.

According to ICRA, the average ATF price in the first five months of this fiscal year was INR 95,906/kilo litre, down from INR 1,21,013/kilo litre in FY23 and Rs 64,715/kilo litre in FY2020.

Additionally, some airlines have foreign currency debt, according to ICRA, which also noted that while domestic airlines have a partial natural hedging to the extent of earnings from their overseas operations, their net payables are primarily in foreign currencies.

The key to increasing the airlines’ profit margins, it was stated, would be to assure fare rises that were equal to increases in their input costs.

Source- Travel biz