New Delhi, 14th July 2022:
• Pent-up demand aided international passenger traffic for Indian carriers to notably surpass pre-Covid levels
• For June 2022, the average daily departures were at ~2,771, notably higher than the average daily departures of ~1,056 in June 2021
• Aviation turbine fuel (ATF) prices, due to ongoing geo-political issues linked to Russia-Ukraine conflict, a likely threat to the recovery process
With return to normalcy in the business environment, the domestic passenger traffic grew by 2.39 times Y-o-Y to ~10.5 million in June 2022 (3.1 million in June 2021) and was only ~12% lower compared to ~12.0 million in June 2019 (pre-Covid level). On a sequential basis, however, the domestic air passenger traffic in June 2022 was ~13% lower compared to ~12.1 million in May 2022, primarily due to the seasonality impact related to the re-opening of schools. The airlines’ capacity deployment for June 2022 was 1.6 times higher than in June 2021 (83,124 departures in June 2022 against 31,693 departures in June 2021). On a sequential basis, the number of departures in June 2022 was lower by around 4% compared to May 2022.
As per a recent report released by ICRA and commenting further, Mr. Suprio Banerjee, Vice President & Sector Head, ICRA said, “For June 2022, the average daily departures were at ~2,771, notably higher than the average daily departures of ~1,056 in June 2021, and marginally lower compared to ~2,784 in May 2022. The average number of passengers per flight during June 2022 was 127, lower than an average of 140 passengers per flight in May 2022 and an average of 139 passengers per flight in June 2019. The recovery in passenger traffic is expected to be relatively faster in FY2023 with the return to normalcy situation; however, an overhang of any further Covid wave looms on the sector and will be monitorable. Elevated ATF prices aggravated by geo-political issues will remain a near-term challenge for the industry and will continue to weigh on the profitability of Indian carriers. The recent depreciation of rupee has further added to the industry woes, given around 35-50% of the airlines’ operating expenses are denominated in US$. Also, led by rising ATF prices, the yields for the airlines have started inching up and are estimated to have moved up by around 20% over the last year.
With the resumption of scheduled international operations since March 27, 2022, and reversion to bilaterally-agreed capacity entitlements, the international passenger traffic for Indian carriers is on a growth trajectory and surged to ~2.1 million in June 2022, which has notably surpassed the international passenger traffic of ~1.8 million witnessed in June 2019 (pre-Covid level) by ~18%.
An area of concern remains, that of ATF prices which have surged by ~120% on a Y-o-Y basis in mid-June 2022, given the elevated crude oil prices, due to geo-political issues arising from the Russian invasion of Ukraine. The rising ATF prices will pose a serious threat to the industry earnings in FY2023. On an aggregate basis, a return to normalcy will lead to recovery in passenger load factors, which in turn will aid revenues; however, elevated ATF prices will continue to weigh on the earnings of Indian carriers in FY2023.
