Domestic passenger traffic up 14% in January 2025: ICRA

MUMBAI: Domestic air passenger traffic reached 150 lakh in January, showing a 0.7% increase up from 149 lakh in December 2024 and a 14.5 % year-on-year growth, said credit rating agency ICRA in its monthly report.
The traffic exceeded pre-Covid levels of January 2020 by 17.9%. This despite a reduction in capacity by 1.2 % as compared to the earlier month of December 2024. When compared to Jan 2024 though, the airline capacity has gone up by 10.8%. The period from April 2024 to January 2025 recorded domestic air passenger traffic of about 1,372 lakh, representing a 7.5% YoY increase and surpassing pre-Covid figures of about 1,214.7 lakh by 13 %. International passenger traffic for Indian carriers reached 249 lakh in the nine months of FY2025, showing 14.5% year on year growth and exceeding pre-Covid levels by 41.7%, it said.
The Indian aviation industry maintains a stable outlook, anticipating modest domestic passenger traffic growth and steady costs in FY2025. FY2024 showed improved pricing power, with higher yields compared to pre-Covid periods. Traffic growth is expected to moderate to 7-10% in FY2025, down from 13% in FY2024, due to base effects and weather disruptions in H1 FY2025. Yields face pressure as airlines focus on maintaining passenger load factors, whilst international traffic is projected to grow 15-20%.
ATF prices averaged Rs. 95,185/KL in 11M FY2025, showing an 8.1% YoY decrease but remaining 45.8% above pre-Covid levels. Fuel comprises 30-40% of airline expenses, with 35-50% of operating costs in USD. Airlines must balance fare increases with input costs to maintain profitability.
The industry anticipates net losses of Rs. 20-30 billion in FY2025 and FY2026, contrasting with FY2024's profit of ~Rs. 16 billion. This projection considers yield pressures and increased borrowing costs, though losses remain significantly lower than previous years.
Supply chain challenges and engine failure continues to impact industry capacity, it said. "The industry has been facing supply chain challenges and issues of engine failures for the Pratt and Whitney (P&W) engines supplied to various airlines. In FY2024, Go Airlines (India) Limited grounded half of its fleet due to faulty P&W engines, thus stalling its operations. InterGlobe Aviation Limited (IndiGo) also had 60-70 aircraft grounded as on January 30, 2025, due to the P&W engine issue, including the powder metal (used to manufacture certain engine parts) contamination factor with its P&W fleet. However, the same is expected to reduce by March 2025," it said.
Overall, the Indian aviation industry had about 132 aircraft for select airlines grounded as on December 31, 2024, which is 15-17% of the total industry fleet, thus impacting the overall industry capacity (as measured by available seat kilometre or ASKMs). Considering the bulk recall of the engines globally by P&W and other existing issues with the original equipment manufacturers’ (OEMs’) engines, the testing by P&W is likely to take longer, said ICRA.
"This will result in increased operating expenses towards the cost of grounding, increased lease rentals due to additional aircraft being taken on lease (primarily wet lease) to offset the grounded capacity, rising lease rates and lower fuel efficiency (due to replacement by older aircraft taken on spot lease). These factors are likely to adversely impact an airlines’ cost structure. However, healthy yields, high PLF and partial compensation available from engine OEMs would help absorb the impact to an extent. In the current fiscal, the industry has also faced challenges related to the availability of pilot and cabin crew, leading to several flight cancellations and delays. Such issues impact the capacity availability and add to customer grievances," it added.