Domestic air passenger traffic up 6% in June 2024: ICRA

The domestic air passenger traffic rose 6.3% year-on-year (YoY) in June 2024, and in comparison to the pre-pandemic level, the traffic jumped 10.4%, ratings agency ICRA said on Tuesday. The traffic for domestic airlines was 7% up YoY but was lower by 3% in comparison to May last year, it said.

“Our outlook on Indian aviation is stable amid the continued recovery in domestic and international air passenger traffic, with a relatively stable cost environment and expectations of the trend continuing in FY2025…The momentum in air passenger traffic witnessed in FY2024 is expected to continue into FY2025, though further expansion in yields from the current levels may be limited,” the agency said.

In the first quarter of FY25, domestic air passenger traffic was up 4.4% YoY, it said. In terms of numbers, in Q1 FY25, domestic passenger traffic was recorded at 402.7 lakh. As per ICRA, domestic passenger traffic rose 14.4% and in the first two months of FY25, the international passenger traffic jumped to 17.5% at 53.4 lakh passengers.

The ratings agency highlighted high air turbine fuel (ATF) prices, supply chain issues and depreciation of Indian Rupee as main challenges for Indian airlines.

The industry has been facing supply chain challenges and issues of engine failures for the Pratt and Whitney (P&W) engines supplied to various airlines.

In FY2024, Go First grounded half of its fleet due to faulty P&W engines, which stalled its operations. IndiGo’s more than 70 aircraft too remain grounded due to the P&W engine issue, including the powder metal (used to manufacture certain engine parts) contamination factor with its P&W fleet.

It is estimated that 24-26% of the total fleet of Indian airlines in operations was grounded by March 31 this year, ICRA said.

“Considering the bulk recall of the engines globally by P&W and other existing issues with the original equipment manufacturers’ (OEM’s) engines, the testing by P&W is likely to take longer, around 250-300 days,” it said.

“This will result in increased operating expenses towards the cost of grounding, increased lease rentals due to additional aircraft being taken on lease to offset the grounded capacity, rising lease rates and lower fuel efficiency, which will adversely impact an airline’s cost structure. However, healthy yields, high passenger load factor (PLF) and partial compensation available from engine OEMs would help absorb the impact to an extent. In the current fiscal, the industry has also faced challenges related to availability of pilot and cabin crew, leading to several flight cancellations and delays,” ICRA said.