Domestic air passenger traffic growth is expected to reduce to a six-year low of 4.5 per cent in fiscal 2020 after five years of double-digit growth, according to ICRA.

The temporary suspension of operations by Jet Airways, the grounding of the Boeing 737 MAX aircraft and technical issues with the Airbus A-320 New Engine Option (NEO) have impacted the industry’s capacity and passenger growth, ICRA said in a study.

The study also pointed out that many domestic airlines are focussing on expanding their international routes and fiscal 2020 will witness a muted domestic capacity growth, as measured by available seat kilometre (ASKM) of about 3 per cent during the fiscal.

While aviation turbine fuel (ATF) price has been benign in the current fiscal, the yields continue to be under pressure. Coupled with rupee depreciation, this has squeezed the Revenue per Available Seat Kilometre — Cost per Available Seat Kilometre spread — exerting significant pressure on airlines’ operating profitability.

“The domestic aviation industry had benefitted significantly during the second half of fiscal 2019 when yields witnessed an improvement due to the decline in industry capacity owing to the grounding of aircraft of Jet Airways. Further, it was supported by the transfer of debt of ₹29,500 crore from Air India Ltd to a special purpose vehicle from October this year,” the rating agency’s report said.

Lower net loss

It said the industry is expected to report a lower net loss of around ₹7,800 crore in FY20 vis-a-vis an estimated ₹10,000 crore net loss in FY19. Excluding Air India, the rest of the industry is expected to report a net loss of ₹1,500 crore in FY20 with a total debt of ₹7,000 crore on as on March 31, 2020. The industry’s prospects are expected to gradually improve, contingent on the movement of ATF prices.

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