“In India, ATF is around 45% of the operating cost of an airline. In addition, 35-50% of the operating expenses of airlines are operated from US dollars,” according to ICRA.
“In India, ATF is about 45% of the operating cost of an airline. In addition, 35-50% of the operating expenses of airlines are operated from US dollars,” according to ICRA.
Credit rating agency ICRA on August 17 said higher aviation turbine fuel (ATF) prices and rupee depreciation are likely to pose a serious threat to the recovery process for the domestic carrier.
“In India, ATF is around 45% of the operating cost of an airline. In addition, 35-50% of the operating expenses of airlines are operated from US dollars,” according to ICRA.
One area of concern remains ATF prices, which have risen nearly 77% in August, given the rise in crude oil prices due to geopolitical issues. Russian invasion of Ukrainerating agency said.
On an overall basis, it said a return to normalcy would improve passenger load factors, which in turn would aid revenue; However, these two factors will continue to impact the earnings of domestic airlines in FY13.
Moreover, the expected launch of Jet Airways and entry of Akasa Air is likely to intensify competition for domestic carriers.
“ICRA is of the view that domestic air traffic yields have increased by 25-30% over pre-COVID levels on domestic routes. Industry earnings in FY2023 will be driven by rise in jet fuel prices. The reason would remain under pressure, coupled with depreciation of the Indian rupee against the US dollar,” ICRA Vice President and Sector Head Supriyo Banerjee said.
On a month-on-month basis, domestic air passenger traffic was down 7% in July, compared to 10.05 million in June, given some impact of cyclicality in passenger travel, mainly during the monsoon. originated over a short period of time. Told.
Icra said the tightening of fares during the month affected leisure travel, which also impacted volumes.
The rating agency also said that the removal of airfares cap with effect from August 31 will help domestic airlines to bring their ticket prices in line with the supply-demand dynamics.
“While the removal of fare restrictions from August 31 will enable domestic carriers to pass on the increased costs partly through fare hikes, the potential for such sharp fare hikes is limited given the intense competition,” Mr. Banerjee said.