Domestic air traffic increases in February; high ATF prices to weigh on carriers, says Icra

Given the lingering impact of the Omicron variant of the coronavirus, airlines’ capacity deployment for February was around 12% lower than February 2021.

Domestic air passenger traffic for February moved up nearly 19% to 76 lakh passengers, against 64 lakh recorded in January. However, on a year-on-year basis, the passenger traffic recorded a marginal decline of 2% as 78 lakh passengers had travelled by air in February 2021.

Given the lingering impact of the Omicron variant of the coronavirus, airlines’ capacity deployment for February was around 12% lower than February 2021. There were 56,634 departures in February 2022 against 64,327 departures during the same month in the previous year.

On a sequential basis, the number of departures in February 2022 were about 10% lower, as apart from the Omicron impact, there were fewer operating days in February. Adjusting for the tenure of days, the number of departures stood almost flat compared to January.

According to a report by ratings agency Icra, despite the improving operating scenario, high prices of aviation turbine fuel (ATF) will continue to weigh on the financial performance of airline companies in FY22.

“ATF prices have seen a sharp increase of around 57% on a y-o-y basis till March 2022. It is mainly attributed to increase in crude oil prices. This, coupled with relatively low capacity utilisation of aircraft fleet, will continue to weigh on the financial performance of Indian carriers in FY22,” the report said.

Suprio Banerjee, vice president and sector head, Icra, said while there is sequential recovery in the air passenger volumes with the waning Omicron wave, on an annual basis, the numbers will remain subdued. “Due to the impact of multiple Covid waves in the current fiscal, the passenger traffic for 11 months of FY22 remained nearly 44% lower than the levels witnessed during the same period in pre-Covid times of FY20. The same is further threatened by the sharp rise in ATF prices, amid the Russia-Ukraine conflict,” he said.

With effect from October 18, 2021, The ministry of civil aviation has allowed the restoration of permitted capacity to 100% for domestic operations, after reducing it to 50% in June due to the second wave of the pandemic.