Domestic Aviation Industry To Log 20% Growth In Profit In FY25 On Strong Passenger Traffic And Travel Demand: CRISIL

The aviation sector registered an almost tripled growth in performance in the current fiscal year and is anticipated to see a major surge in FY25, the ratings agency noted

The agency analysed three major airlines, that together account for the majority of India’s air traffic and found that passenger traffic is estimated to rise by 18 to 20 per cent in FY24

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The domestic aviation industry is expected to clock a 20 per cent growth in operating profit in the upcoming 2024-25 fiscal year, CRISIL Ratings said. The aviation sector registered an almost tripled growth in performance in the current fiscal year and is anticipated to see a major surge in FY25, the ratings agency noted. 

This growth was supported by a strong recovery in passenger traffic and a stable foreign exchange rate, Financial Express reported citing the agency. Commenting further on the projections, Mohit Makhija, Senior Director, CRISIL Ratings, said, “Operating profit growth in the next fiscal is anticipated to hover around 20%, up from the estimated Rs 18,000-20,000 crore in the current fiscal, notwithstanding potential technical issues with certain engine types that may ground some aircraft and curtail fleet expansions. While the momentum in passenger traffic growth is expected to persist, operating profit growth is likely to normalize due to the high base effect from this fiscal.”

The ratings agency analysed three major airlines, that together account for the majority of India’s air traffic and found that passenger traffic is anticipated to increase by 18 to 20 per cent in the current fiscal year, bypassing the pre-pandemic levels.

This growth was credited to a boost in business and leisure travel, the analysis noted. The report stated that the growth is expected to continue in FY25, helped by economic growth. The push in passenger traffic has also helped airlines pass on the fuel costs to the passengers. Notably, fuel accounts for about 40 to 50 per cent of the overall expenses for the airlines. In the past three fiscal years, fuel prices have more than doubled.

The report also noted that moderating foreign exchange losses in comparison to the preceding fiscal has also heavily contributed towards the growth. Foreign reserves have a major impact on profits for the airlines as a massive amount of their debt and costs are denominated in foreign currency. 

Snehil Shukla, Associate Director, CRISIL Ratings added, “While net debt, including lease liabilities, is expected to double to approximately Rs 1 lakh crore by the end of the next fiscal year compared to fiscal 2023, credit metrics will strengthen supported by robust operating performance and equity injections. The net debt to Ebitdar ratio is anticipated to improve to less than 5 times over this fiscal year and the next, down from 8.6 times in fiscal 2023 and significantly below pre-pandemic levels.