Aviation industry’s net loss may moderate to Rs 2,000-3,000 crore in FY25: ICRA

Bengaluru: Rating agency ICRA, in a report on Thursday, lowered the estimated net loss for the Indian aviation industry to Rs 2,000-3,000 crore  in the current financial year (FY) and FY26 from the earlier estimates of Rs  3,000-4,000 crore. 

The report attributed this reduction in forecast to the better pricing discipline exhibited by airlines' in FY24 and so far in FY25 and a relatively stable cost environment.

Remarkably, this reduction in estimated net loss comes even as the report lowered its estimates for the domestic air passenger traffic growth in the current fiscal to 7-10 per cent from 8-13 per cent, owing to the high base of FY24 and lower-than-estimated passenger traffic seen in the first quarter of FY25, following the impact of severe heat waves and other weather-related disruptions.

"ICRA forecasts the domestic passenger traffic to reach 164-170 million in FY25 and maintains a stable outlook on the Indian aviation industry. The international air passenger traffic for Indian carriers is expected to expand by a healthier 15-20% in FY25, " said the report.  

"The industry continues to demonstrate improved pricing power, as reflected in the increased spread between revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) for the airlines," the report added. 

According to the report, around 35-50% of the airlines’ operating expenses such as aircraft lease payments, fuel expenses, and a significant portion of aircraft and engine maintenance expenses are denominated in dollar terms. Furthermore, some airlines also have foreign currency debt. This means that if the dollar strengthens against the rupee, airlines end up paying more in rupee terms on key operational expenditure.