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Updated March 15th, 2024 at 18:52 IST

Indian aviation industry’s 24-26% fleet capacity to remain grounded till March end, says ICRA

With one-fourth of domestic carriers' fleet likely to be grounded, airlines are adding capacities to meet the summer rush.

Reported by: Saqib Malik
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Aircraft groundings: The Indian aviation sector has been of late affected by engine failures and supply chain challenges. This has resulted in the grounding of aircraft for select airlines, thus impacting overall industry capacity, as measured by available seat kilometre or ASKMs, with nearly 20-22 per cent of the total industry fleet grounded as of September 30, 2023. 
The recent powder-coating-related concerns in engines are expected to result in the additional grounding of aircraft in Q4 FY2024, implying that 24-26 per cent of the industry capacity will be grounded by March 31, 2024, thus affecting the industry’s ASKMs, Kinjal Shah, Vice President & Co-Group Head - Corporate Ratings, ICRA Limited told Republic Business in an exclusive interaction. 

 

Hovering but not arrived yet   

Rating agency ICRA has maintained a ‘stable’ outlook for India’s aviation sector, stating that domestic air traffic for the current financial year ending March 31 is estimated to grow 8-13 per cent year-on-year (YoY) to 15-15.5 crore, and a similar rate of growth is expected in FY25, taking the passenger traffic to 16.5 to 17 crore in the coming fiscal.

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Kinjal Shah, Vice President & Co-Group Head, Corporate Ratings, ICRA Limited told Republic Business that with almost 24-26 per cent of the fleet of Indian carriers expected to be grounded until the end of FY24, airlines are looking at expanding their capacities by taking on spot leases so as to meet the upcoming peak season demand.

The capacity deployment of airlines in February this year was up by 3.4 per cent compared to the corresponding period last year. The demand-supply imbalance in India’s air travel becomes more evident at the onset of a high-demand season. Shah told Republic Business that with almost 24-26 per cent of the fleet of Indian carriers expected to have been grounded in Q1FY25, airlines are looking at expanding their capacities by taking on spot leases so as to meet the upcoming peak season demand.

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Notably, even as the capacity deployment of airlines seen during February this year witnessed substantial growth,  the planned total seat capacity airlines expect to offer in the upcoming months was lower by 5.6 per cent as compared to the pre-COVID levels of February 2020.  

As the peak travel period, spanning from April to July approaches fast, the route and fleet expansions of airlines are happening thick and fast.  Last month, IndiGo announced new domestic routes to tap into the summer travel demand. The latest routes will be functional from March 31. Budget carrier SpiceJet on Thursday finalised a lease deal for 10 aircraft to enhance summer capacity.  

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Image credit: Unsplash 

Passenger Load Factor, ATF   

It is estimated that the domestic aviation industry operated at a passenger load factor (PLF) of 90 per cent in February 2024, against 88 per cent in February 2023 and 88 per cent in February 2020, which is also the yardstick for pre-COVID levels. 

As per the ICRA report, in FY2024, the Aviation Turbine Fuel (ATF) prices witnessed a sequential decline till June 2023. Post which, it increased sequentially till October 2023. However, they decreased sequentially again by 6 per cent in November 2023, 5 per cent in December 2023, 4 per cent in January 2024, and 1 per cent in February 2024. 

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In March 2024, the prices were marginally higher sequentially by 0.5 per cent. From April 2023 till September 2023, ATF prices were lower on a YoY basis, however, it increased by 1.3 per cent YoY in October 2023, the first time in FY2024, driven by the increasing crude oil prices over the past four months. 

“Nevertheless, in November 2023, December 2023, January 2024, February 2024, and March 2024, the ATF prices were lower by 8.3 per cent, 10.5 per cent, 6.4 per cent, 10.9 per cent, and 6.8 per cent on a YoY basis, respectively, following the trend in crude oil prices,” says the ICRA report.

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Published March 15th, 2024 at 16:05 IST

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