India's Aviation Sector Faces Financial Turbulence

India's domestic aviation industry is on the brink of a significant financial setback, with projections indicating a net loss of Rs 2,000 to Rs 3,000 crore in the current and upcoming financial years. This alarming forecast comes amidst ongoing supply chain disruptions and engine-related challenges, as highlighted in a recent report by the rating agency ICRA.

Passenger Traffic and Capacity Deployment

Despite the hurdles, domestic air passenger traffic in December saw a 7.3% increase, reaching 153 lakh passengers compared to 142.5 lakh in November 2024. This growth represents a 10.8% year-on-year increase and a 17.5% rise over pre-Covid levels in December 2019. Airlines have also ramped up their capacity deployment, showing a 7.5% increase over December 2023 and a 3.8% rise over November 2024.

Outlook and Challenges Ahead

ICRA has provided a stable outlook for the industry, anticipating moderate growth in domestic air passenger traffic and a relatively stable cost environment for FY25. However, the agency warns of potential pressures on yields as airlines aim to maintain adequate passenger load factors. International passenger traffic for Indian carriers is expected to grow by 15-20% in FY2025.

Supply chain challenges and engine failure issues, which have plagued the industry over the past 18 months, are expected to continue, exacerbating financial strains. ICRA predicts the industry will record a net loss of Rs 20-30 billion for FY25 and FY26.