Aviation Traffic Set to Soar Despite Losses

Domestic airlines in India are on track to expand their fleets significantly, with the addition of 84 aircraft this year, increasing the total fleet size to 812 by the end of FY25 from 728 the previous year.

The fleet is expected to double by 2030. However, the aviation industry is projected to experience substantial financial losses. According to an aviation consulting firm, domestic airlines are likely to widen their losses to $400-600 million in FY25, despite an anticipated rise in passenger traffic. This forecast comes after an estimated loss of $300-400 million in FY24, excluding the profitable IndiGo. SpiceJet, which has faced financial difficulties, has yet to report its results for the last two quarters. InterGlobe Aviation, the parent company of IndiGo, reported a profit of Rs 1,894.8 crore for the January-March quarter, marking its sixth consecutive quarter of profitability.

One contributing factor to the projected losses is the ongoing capacity shortage caused by the grounding of approximately 130 aircraft due to various issues. This number could rise to 180 if the grounded fleet of Go First, which ceased operations last year, is included. Despite these challenges, the domestic aviation sector is expected to witness growth in both passenger and cargo volumes. Domestic traffic and cargo volumes have returned to pre-Covid levels as of 2023, with a projected growth of 6-8% in FY25, reaching 161-164 million passengers. International traffic is also expected to increase by 9-11%, reaching 75-78 million passengers.

Domestic airfares saw a modest rise of 1.3% in FY24, standing 34% higher than in FY20. However, airline operating costs are expected to rise by 3.8% in FY25. The sector also faces a shortage of pilots, a critical issue that is expected to worsen with the impending implementation of new Flight Duty Time Limitations (FDTL) norms. Last year, airlines such as Air India, Akasa Air, Vistara, and Air India Express faced operational disruptions due to pilot rostering issues related to FDTL norms. Looking ahead, CAPA anticipates the privatisation of 25 more airports in the next financial year, alongside an investment of $4 billion by the Airports Authority of India over the next two years to enhance airport infrastructure. The projected expansion of the fleet and the expected rise in passenger traffic present both opportunities and challenges for the Indian aviation sector. While the industry grapples with financial losses and operational hurdles, the ongoing investments in infrastructure and fleet expansion signal a commitment to long-term growth and development.