Rating agency ICRA has assigned a negative outlook to the domestic airline industry. However, rating agency is expecting that the domestic passenger traffic growth will remain healthy at around 15-16 per cent over the medium term, supported by low penetration levels, favourable macro environment, regulatory push towards regional connectivity and development of new airports.
ICRA stated that while the passenger traffic growth remained strong during the previous fiscal and the first half of the current fiscal, the industry faced a double whammy with increasing jet fuel cost and rupee depreciation. It added the cost pressures are expected to continue in the balance part of FY19, resulting in further weakening of the financial health of the industry.
Besides, it underlined that rise in aviation fuel price and rupee depreciation has squeezed revenue and cost per available seat kilometre (RASK-CASK), exerting significant pressure on operating profitability of airlines. This will result in significantly higher losses (at net level) in the fiscal 2018-19 as compared to the previous fiscal. Moreover, it added that the airline industry maintains strong capacity addition plans, as reflected in the large order book of the domestic airlines.