Indian Aviation Industry To Post Net Loss Of Upto Rs 3,000 Crore In FY25, FY26: ICRA

The Indian aviation industry is expected to cumulatively post a net loss in the range of Rs 2,000-3,000 crore in fiscal 2025 and fiscal 2026, as compared to a net profit of Rs 1,600 crore in fiscal 2024, according to a note released by ratings agency ICRA Ltd. on Tuesday.

The projection of net loss is "due to anticipated pressure on yields" as airlines strive to maintain adequate passenger load factor amid elevated aviation turbine fuel prices, it said.

The average ATF price in the first nine months of this fiscal stood at Rs 95,686 per kilolitre. Although it was lower by 7.7% on a year-on-year basis, it remained "47% higher" as compared to the pre-Covid level, ICRA said. This will keep the pressure on airlines' profitability, as the fuel cost accounts for around 30-40% of the airlines' expenses, it added.

The projected loss for fiscal 2025 and 2026 is still lower as compared to the loss of Rs 23,500 crore logged in fiscal 2022 and Rs 17,400 crore in fiscal 2023, ICRA said.

The industry-wide net losses will "remain range-bound," and the pace of recovery in industry earnings is likely to be gradual, the note further stated.

Supply chain challenges and engine failure issues impacted the industry capacity over the last 18 months and are expected to continue affecting it in this fiscal year, according to ICRA.

Overall, the Indian aviation industry had around 144 aircraft for select airlines grounded as of Sept. 30, 2024, which is 16-18% of the total industry fleet, "thus impacting the overall industry capacity," it added.

Outlook 'Stable'

Despite projecting losses, ICRA said its outlook for the Indian aviation industry remains "stable," driven by expectations of moderate growth in domestic air passenger traffic and a relatively stable cost environment in fiscal 2025.

This comes a day after data released by the Directorate General of Civil Aviation showed domestic air passenger traffic rising to 1.43 crore passengers in November 2024, up 11.9% as compared to 1.27 crore passengers in the year-ago period.

The domestic passengers' footfall also increased by 5% as against 1.36 crore passengers in October 2024, the DGCA data showed. As per ICRA, the air passenger traffic has climbed by 11.9% as compared to the pre-Covid levels.

However, after a 13% growth in passenger traffic logged in fiscal 2024, the growth is likely to "taper to 7-10%" in fiscal 2025, the note stated.

The projection comes in the backdrop of the "high base of fiscal 2024" and some adverse impact on the passenger footfall during the first half of this fiscal due to "severe heat waves and other weather-related disruptions."\

The pace of international passenger traffic growth for Indian carriers is expected to be sharper, growing by 15-20% in fiscal 2025, as per ICRA.