The Indian aviation industry is seeing a steady month-on-month recovery, according to credit rating agency ICRA. The agency said there has been a sequential growth of 30-31 per cent as the Covid-19 infection trajectory dropped.

In August, domestic passenger traffic registered improvement at 65-66 lakh, compared to 50.1 lakh in July 2021, a y-o-y growth of around 131 per cent.

Airlines’ capacity deployment for August 2021 was about 99 per cent higher at around 57,500 departures (28,834 in August 2020). On sequential basis, the number of departures in August 2021 was higher by 22 per cent, as Covid infections were on a downward trajectory .

For August 2021, average daily departures were at 1,900, significantly higher than 900 in August 2020, and 1,500 in July 2021.

The Ministry of Civil Aviation had increased the permitted capacity to 65 per cent from July 5. It has now allowed increasing capacity to 72.5 per cent from August 12 until further orders.

Kinjal Shah, Vice-President & Co-Group Head-Corporate Ratings, ICRA, said, “Though the recovery continued in August, there is continued stress on demand, driven largely by second wave of the pandemic, limiting travel to only necessary travel, while both leisure and business travel have been curtailed due to various State-wide restrictions, despite the decline in infections.”

Rising ATF prices

Elevated aviation turbine fuel prices continue to pose a near-term challenge. However, a marginal sequential decline of 3.8 per cent in September 2021 is a respite for the industry. The MoCA also increased the minimum and maximum fare band by 10-13 per cent for domestic flights with effect from August 12 until August 31.

In ICRA’s view, the price increase may not materially impact passenger traffic demand as travel is limited to necessary one. However, it will allow airlines to recoup some part of the increase in ATF prices, cushioning impact of losses.

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