AVIATION ON A GROWTH PATH

ICRA estimates an increase in domestic air passenger traffic to 164-170 million in FY2025, reflecting a YoY growth of 7-10 per cent over 154 million in FY2024. During 8M FY2025 (April-November 2024), the domestic air passenger traffic stood at 107.5 million, with a YoY growth of 6.7 per cent, partly impacted by the severe heat waves and other weather-related disruptions. The international passenger traffic growth for Indian carriers expanded and was healthier at 15.9 per cent in 7M FY2025 (April-October 2024). This momentum is expected to continue for the balance part of FY2025 as well. ICRA has a 'Stable' outlook on the Indian aviation industry, a reflection of the continued growth in domestic and international air passenger traffic.

- K. RAVICHANDRAN, CRO, ICRA

Airlines' cost structure is typically driven by two key components—aviation turbine fuel (ATF) prices and the Re-dollar movement. Fuel costs account for ~30-40 per cent of the airlines' expenses, while ~35-50 per cent of the airlines' operating expenses—including aircraft lease payments, fuel expenses and a significant portion of aircraft and engine maintenance expenses - are denominated in dollar terms. Further, some airlines also have foreign currency debt. While the domestic airlines also have a partial natural hedge to the extent of earnings from their international operations, overall, they have net payables in foreign currency.