The air passenger traffic in India stood at 24.0 million in September 2017, exhibiting a year-on-year (YoY) growth of 15% over September 2016. According to an ICRA note, the YoY growth rate for aircraft traffic was 14% in September 2017.

Commenting on the development, Harsh Jagnani, Vice President and Sector Head, Corporate Ratings, ICRA Limited, said: “The YoY air passenger growth has remained robust at 15% in Septem ber 2017, witnessing a slight increase from 14% YoY growth reported in August 2017. The growth has been driven primarily by an increase in domestic passenger traffic, which constitutes around 79% of the total passenger traffic in the country and reported a 16.3% YoY growth in September 2017 as against 15.8% growth in August 2017.”

Overall, for Q2 FY 2018, the YoY passenger traffic growth has remained steady at 14%, which comes out as great the industry given that July-September is traditionally considered to be a lean period. In line with the growth in passenger traffic, the aircraft traffic has also witnessed a healthy increase, reporting YoY growth of 14% for September 2017 and 13% for Q2FY2018.

As per an ICRA note, the domestic passenger traffic growth after having grown at above 20% over the last two years, moderated to 16.3% in H1 FY2018. Though the aviation turbine fuel (ATF) prices remained higher during H1 FY2018 on a YoY basis, the ability of the airlines to pass-on the same supported the profitability of the industry during H1 FY2018. Though there is a gradual improvement in the core growth drivers like economic environment, tourism demand and regulatory support, airport infrastructure remains a bottleneck for the industry’s growth potential. Going forward, strong demand during the peak season is expected to support the industry profitability during H2 FY2018.

According to Kinjal Shah, Assistant Vice President and Co-Head-Corporate Sector Ratings, ICRA, “The industry has done well to mitigate the impact of 8.7% Y-o-Y increase in ATF prices during H1 FY2018. The increased ability of the airlines to pass on the costs to the customers due to reduced competitive intensity has resulted in an increase in the revenue per available seat kilometre (RASK)-cost per available seat kilometre (CASK) spread for the airlines and the financial performance of most of the airlines improved during the current year. With peak season demand expected to be robust in H2 FY2018, the aggregate net loss of the industry is expected to reduce to INR 50 million to INR 1 billion in FY2018 from INR 10 billion in the previous year. It has to be noted that the loss is primarily on account of losses of Air India, while all other major airlines are expected to report profits during the year.”