Overcoming Persistent Obstacles, the Indian Aviation Sector Expects a Net Loss of Rs 30–40 Billion in FY25, According to ICRA

New Delhi According to research by ratings agency ICRA, the aviation industry in India is expected to incur a net loss of ₹30-40 billion (₹3,000-4,000 crore) this fiscal year, which is comparable to the losses recorded in FY24. Supply chain interruptions, engine failures, and a lack of crew and pilots are just a few of the challenges the industry is facing, all of which are likely to make profitability recovery slower than planned.

The analysis by ICRA highlights that one of the major factors impacting the financial performance of the aviation sector is the high fixed-cost nature of the business. Due to the high fixed-cost structure of the business, the industry’s profits recovery is expected to be sluggish. The report stated that the Indian aviation industry is expected to record a net loss of 30–40 billion in FY2025, which is lower than the levels of 170–175 billion in FY2023—as long as airlines continue to experience healthy growth in passenger traffic and keep pricing disciplined. This is in line with what was seen in FY2024.

The industry suffered a sizable net loss of $170–$175 billion in FY23 as a result of the rupee’s depreciation against the US dollar and the high cost of aviation turbine fuel (ATF). Compared to levels before the COVID-19 pandemic, ATF costs are still much higher, even if they have fallen from their peak. In FY24, the average price of ATF was ₹103,499 per kiloliter (kl), which was 14% lower than in FY23 but 58% higher than the levels before COVID-19.

There have been and will be ongoing effects on airlines’ cost structures from the high cost of fuel—which accounts for 30–40% of their operations—and other operational expenses expressed in US dollars. Foreign currency accounts for 45–60% of operating expenses, according to the ICRA. This includes maintenance costs and payments for aircraft leases. This has a negative impact on carriers like GoFirst and IndiGo because of issues with their supply chains and the large number of grounded aircraft due to engine problems, particularly with Pratt & Whitney engines.

Passenger travel has recovered strongly despite these obstacles. In FY24, domestic air passenger traffic surpassed pre-Covid levels, growing by 13% year-on-year to 15.4 crore. Indian airlines also saw a surge in international passenger traffic, with a 24% increase to 29.68 million, surpassing the highest levels seen in FY19. Domestic airline passenger traffic hit 27.09 million in the first half of fiscal year 25.

“Inflation is on a declining trajectory, and GDP growth is optimistic,” said Adhil Shetty, CEO of Bankbazaar.com, when asked about the industry’s prospects. Inflation must remain permanently and sustainably in line with the RBI’s objective; therefore, the central bank has correctly chosen not to relax its vigilance at this point.

If airlines can boost yields in pace with their input cost increases, the aviation sector as a whole will be able to turn a profit. With air passenger traffic continuing to recover and costs remaining reasonably steady, ICRA maintains a stable outlook for the Indian aviation sector. The capacity to increase yields beyond their present levels, however, may be constrained.

Focusing on keeping passenger load factors healthy and obtaining some reimbursement from engine manufacturers would help the industry manage these problems and offset the financial effect of grounded aircraft and other operational interruptions.

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