The Indian airline industry is likely to cut down its losses to about Rs 50-70 billion in FY24, owing to healthy passenger traffic and the ability to shore up their yields, ratings agency ICRA said in a sectoral report.
Owing to an elevated aviation turbine fuel (ATF) price coupled with the depreciation of Indian rupee against the US dollar, the Indian airline industry reported a net loss of about Rs 110-130 billion FY23, it said.
However, the loss figure is much lower than the net loss of about Rs 235 billion in FY2022 and ICRA's earlier estimated net loss of Rs 150-170 billion in FY2023, primarily driven by improved ability of the airlines to shore up their yields without impacting demand.
The net loss is further expected to reduce to Rs 50-70 billion in FY24 as airlines continue to witness healthy passenger traffic growth and pricing discipline.
According to the report, the pace of recovery in industry earnings will be gradual owing to the high fixed-cost nature of the business.
On the financial strength of the players, the ICRA said some airlines have adequate liquidity and/or financial support from a strong parent, which can help them sustain over the near term, for others, the credit metrics and liquidity profile will remain under stress over the near term, though better than over the past few years.
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The credit rating agency said capacity addition in FY23 has been limited to around 10 per cent of the FY22 fleet of airlines, which was close to around 700 aircraft.
There are large aircraft purchase orders announced by various players in the industry. As per the indicative numbers, the total fleet deliveries pending are close to about 1,100, which is about 1.5 times the fleet currently under operation.
However, these will be delivered over the medium to long term and a large part of these will be towards replacement of old aircraft with new fuel-efficient ones.
In addition, supply-chain challenges faced by aircraft manufacturers are also likely to constrain their production schedules as is reflected in the grounding of certain aircraft for some of the airlines. The ICRA believes that capacity addition for the industry will only be gradual.
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