India's domestic airline passenger growth decelerates for the first time in 16 months
Passenger growth in India’s domestic airline sector decelerated to 15.7% year-on-year -- lowest in 16 months.
“Domestic passenger traffic growth, after reporting above 20% YoY growth since October 2015, decelerated to 15.7% YoY growth in February 2017,” ICRA said.
However, affordability of airfares and more passengers choosing air transport over others has still kept air passenger growth ‘robust,’ the analysts said.
“The industry reported healthy domestic passenger load factor (PLF) of 87.2% in February 2017 and 84.6% in 11m FY2017; however, at the expense of lower yields,” the report said.
In the January – February period there were 182.34 lakh passengers who flew domestic carriers, as per the Directorate General Council of Aviation (DGCA) reports as on March 18.
“According to an ICRA study, growth, however, still remains at a comfortable level considering off-peak season for the industry along with high base effect where the industry growth has remained robust over last three fiscals. The traffic growth for 11m FY2017 period remained robust at 22.5% YoY,” ICRA said.
The airlines have been giving attractive discounts to its passengers with summer season head-on.
“Continued low airfares due to intense competition remained a key driver for the growth. ICRA said that the sizeable fleet expansion by the incumbents and scaling up of operations by new airlines to continue going forward, resulting in sizeable capacity addition in the industry,” ICRA said.
“In line with lower demand during off-peak season, the growth in capacity addition (measured in available seat kilometers – ASKMs) on domestic routes was lower at 13.8% as against around 20% for the last 15 months,” the report added.
Commenting on air passenger traffic growth, Kinjal Shah, AVP and Co Head, Corporate Sector Ratings, ICRA Limited said, “We have highlighted in the past about pressure on performance of regional airlines due to intense competition in the industry. The same is reflected in suspension of operations of Air Pegasus and Air Costa from July 2016 and February 2017, respectively."
"Apart from competition, profitability of the Indian airlines also remains vulnerable to increase in aviation turbine fuel (ATF) prices and cost efficiencies,” Shah said.
Air passenger traffic growth on international routes remained moderate, the report said with the industry reporting 6.8% YoY growth during February 2017.
“Performance of Indian carriers on international routes continued to remain better than the industry, with 12.1% growth in traffic,” ICRA said.
"Going forward, the profitability of the airlines would remain contingent on ATF prices, considering the yields are likely to remain under pressure. In the context of sizeable planned capacity addition in the industry, structural changes and cost efficiencies would remain critical for commercial viability of airlines,” Shah said.
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