Peak season provides impetus to air passenger traffic growth in December 2016, says ICRA

| Updated: Feb 09, 2017 21:32 IST

New Delhi [India], Feb 9 (ANI): Undeterred by demonetisation, the domestic air passenger traffic reported a robust YoY growth of 24 percent in December 2016. The growth was propelled by peak season demand along with prevalent low airfares due to intense competition. The traffic growth on international routes was however impacted slightly, with the industry reporting 7.7 percent YoY growth during the month. Nevertheless, performance of Indian carriers on international routes was better than the industry, with 16.1 percent growth in traffic. Domestic passenger traffic growth was healthy at 22.9 percent during 9m FY2017. The rate of capacity addition (measured in available seat kilometers - ASKMs) on domestic routes was healthy at 20.6 percent for 9m FY2017, driven by sizeable fleet expansion by the incumbents and scaling up of operations by new airlines. The same has been impelling the airlines to continue with competitive airfares, thus impacting the yields. Though the industry has been able to report healthy domestic passenger load factor (PLF) performance (88.7 percent in December 2016 and 83.9 percent in 9m FY2017) in the current fiscal, the same was inadequate to offset decline in yields. Effect of fleet expansion by airlines has also trickled down to international routes, which reported 10.9 percent YoY growth in ASKMs during 9m FY2017; however, due to comparatively weaker brand positioning of the Indian airlines on international routes, the PLF performance remained weaker than the domestic performance. "ICRA has been emphasizing on pressure on profitability of airlines operating in the country due to competitive environment and increasing aviation turbine fuel (ATF) prices in the current fiscal and the same has been reflected in decline in profitability of the listed airlines in Q3 FY2017," said AVP and Associate Head Corporate Sector Ratings ICRA, Anand Kulkarni. As per ICRA estimates, the fuel cost per ASKM (CASK) of the domestic aviation industry increased to Rs. 1.08 in December 2016 from a low of Rs. 0.82 in February 2016 and the same is expected to increase further in Q4 FY2017. The ATF prices in February 2017 are ~50 percent higher on YoY basis. Further, the capacity addition in the industry is expected to continue at a healthy pace given the proposed fleet expansion plans of various airlines. In the domestic market, Indigo continues to remain the leader during 9m FY2017, with a market share of 40.2 percent. Other key players like Jet Group and Air India Group conceded their market shares to Indigo as well as new airlines. Amongst the new airlines, Vistara and AirAsia reported improvement in their capacity deployment, PLFs and hence market shares. The regional airlines (Air Costa, TruJet, Air Pegasus and Air Carnival), however, continued their underperformance and hence reported modest contraction in their market shares. (ANI)