Despite bottom line pressure, FY17 to be the best for airlines

Airlines are likely to close the outgoing financial year with 22-23% traffic growth, making it one of the best for the sector, even though the pressure on their bottom line is increasing as oil prices are on a northward-ho, says a report.

"Airlines are maintaining healthy load factors backed by low fares. But since oil prices are on an uptrend, impact on profitability in Q4 is inevitable as average ATF price during the quarter are 37.9% higher YoY, while the yields continue to remain under pressure," says an Icra report.

The fuel cost per ASKM increased to Rs 1.16 in January from a low of Rs 0.82 a year ago, and the same is expected to increase further in February and March, according to Icra.

Backed by competitive pricing, the industry reported stellar passenger load factor of 84.4% during the first 10 months of the year, which is also one of the best amongst the key markets in the world. The PLF stood at 88.3% in January.

The aviation industry has reported YoY passenger traffic growth of 23.2% during the first 10 months of the current financial year and is heading towards completing one of the best years in terms of passenger traffic growth, says the report.

The domestic passenger growth for last five years stood at 12.9%, 5.3%, 4.6%, 15.5% and 22.1%, and the industry is likely to surpass the last year growth rate, making the domestic market the fastest growing in the world.

In January, traffic growth rose to healthy at 25.3%, while the international traffic growth was moderate at 8.8%. For the full year till January however this is the highest in world with 17.8% growth in traffic.

The industry capacity, measured in available seat kilometres or ASKMs, reported 20.6% YoY growth during the first 10 months of the year. Except Air Costa and Air Pegasus (which halted operations since August 2016), all the airlines reported capacity growth during the year.

Indigo continued to enjoy the leadership position with a market share of 40.1% in the first 10 month fiscal 2017. This is the fifth year of market leadership for the airline as well as the first airline to achieve 40% market share in the past eight years.

While Jet Airways and Air India continue to concede market shares, the new players Vistara and AirAsia, have reported gradual expansion in their market shares to 2.7% and 2.5% respectively, during the first 10 months of the year.