ICRA, an Indian credit rating agency, in its recent study, revealed that the domestic air passenger traffic growth is expected to register a six-year low of 4.5 per cent in FY 2020, after five years of double-digit growth. Factors such as temporary suspension of operations by Jet Airways, the grounding of the Boeing 737 MAX aircraft and technical issues with the Airbus A-320 New Engine Option (NEO) have impacted the industry’s capacity and passenger growth, the report stated.
The study states that fiscal 2020 will witness a muted domestic capacity growth, as measured by available seat kilometre (ASKM) of about 3%. While aviation turbine fuel (ATF) price has been benign in the current fiscal, the yields continue to be under pressure. Coupled with rupee depreciation, this has squeezed the Revenue per Available Seat Kilometre-Cost per Available Seat Kilometre spread, exerting significant pressure on airlines’ operating profitability.
The domestic aviation industry had benefitted significantly during the second half of fiscal 2019 when yields witnessed an improvement due to the decline in industry capacity owing to the grounding of aircraft of Jet Airways. It was also supported by the transfer of debt of INR 29,500 crores from Air India Ltd to a special purpose vehicle from October this year, the rating agency’s report disclosed.
