Airlines in India are expected to benefit significantly from the high travel demand during this financial year, so much so that their losses could be slashed by half compared to the previous fiscal. Recovery from COVID-induced losses and the effect of other global events was always going to take a considerably long time. And while fuel prices have gone down, the decline in currency value remains a factor.
Cutting down losses
Indian airlines are expected to end the financial year 2024 on a much better note compared to the previous one. According to credit rating agency ICRA, the country’s carriers will witness a significant decline in losses to around ₹50-70 billion ($600-840 million).
Photo: BoeingMan777/Shutterstock
India has been one of the fastest-recovering aviation markets in the world. Due to a robust domestic sector, Indian airlines could sustain operations due to local passenger demand, and this has been the backbone of the post-pandemic recovery process in the country.
Still, global crises, including the war in Ukraine and the following rise in fuel prices, played a role in the sector’s financial health last year when its cumulative loss was estimated to be between $1.3 to 1.5 billion. ICRA commented,
“The net loss is expected to reduce further to Rs 5,000-7,000 crore in 2023-24 as airlines continue to witness healthy passenger traffic growth and improve their RASK-CASK spread through better pricing discipline.”
Situation is stabilizing
While there’s still time before the industry as a whole could become profitable, the situation has improved vastly in the last year. ICRA has highlighted that aviation fuel prices were $1,155 per kilo liter in the first five months this year compared with $1458 in the previous financial year.
Photo: Savvapanf Photo/Shutterstock
But the Indian rupee has seen a significant fall in value, which continues to be a problem for many carriers with debt payable in foreign currency. Thankfully, a drop in fuel prices has helped balance things out to a certain extent, although there’s much more scope for improvement.
Pricing is key
But one positive trend that has emerged after the pandemic is the massive hunger for travel among Indian passengers after the pandemic. Many have viewed this as revenge travel, but it has lasted long enough to have a lasting positive impact on the industry.
To combat a weak rupee and any fluctuation in oil prices, airlines could keep fares on the higher side as there seems to be enough demand for travel to absorb a price hike. And this will play a crucial role in helping airlines maintain profitability margins.
Photo: Akasa Air
Indeed, India’s domestic airline market demand is now above the pre-pandemic mark. During the start of this year’s Northern Summer travel season in June, India has quickly overtaken Japan and Brazil in holding the world’s third-largest market share at 2.0% of the total 42.0%, following behind China with 6.4% and the US with 19.2%. Hopefully, the boom in travel will help improve the finances of the overall industry for many more months to come.
What are your views on this? Please leave a comment below.
