Icra: Indian airlines benefit from low oil price

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By admin October 26, 2015 21:55

Icra: Indian airlines benefit from low oil price

Analysts Icra have determined that Indian domestic airlines will be able to reduce their losses from around Rs 8,500 crore last year to around Rs 5,500 crore due to low crude oil prices, increases in efficiency and an increase in air traffic. The report from India rating agency Icra states that operating performance of the domestic airlines is likely to improve even though concerns on their structural viability still remain.

“We expect the domestic airlines to continue to improve their performance in FY16 given the favourable jet fuel pricing environment. We expect their aggregate losses to further come down to around Rs 5,500 crore in FY16 from around Rs 8,500 crore in FY15,” Icra said.

“In addition to declining fuel prices, efficiency gains through process improvements, route rationalisation and careful balancing of capacity with demand are other factors which have supported the improved operating performance of airlines,” says the report.

The lower fuel cost has resulted in 12-13 per cent reduction in operating cost, the report says.

It goes on to warn the industry that the ongoing structural challenges and intense competition is putting pressure on yields.

Domestic passenger traffic has been growing at a steady rate – 4.9 per cent in FY14 and 15.5 per cent in FY15, while the addition of new players and capacity has resulted in growth in the average monthly available seat kilometres (ASKMs) to 7,800 million in five months of FY16 from 6,300 million in FY13, even though the PLFs too grew from an average level of 74 per cent to 82 per cent during the same period.

Revenue passenger kilometres (RPKMs) also increased as result from 4,700 million in FY13 to 6,400 million in the first five months of FY16, although at the expense of lower yields for the airlines. But going forward, the ASKMs are likely to grow at a healthy pace supported by aggressive capacity additions by the existing players as well as scaling up of operations by the new entrants.

admin
By admin October 26, 2015 21:55