Airfares Expected To Rise 7-9% This Fiscal—The Highest Since 2013
Passengers arrive to board their flights at the Indira Gandhi International Airport in New Delhi, India (Photographer: Amit Bhargava/Bloomberg News)  

Airfares Expected To Rise 7-9% This Fiscal—The Highest Since 2013

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Air passengers are likely to shell out the highest fares for domestic travel this fiscal with the ticket prices expected to spike 7-9 percent during the period because of limited capacity additions since the grounding of Jet Airways (India) Ltd., rating agency Crisil Research said.

Crisil also forecast domestic passengers traffic to grow 6-8 percent in FY20, as against a healthy 19 percent growth registered in the year ended March 2019, on account of non-revival of Jet Airways, which ceased all operations in April due to liquidity crisis and is now under insolvency proceedings.

The 7-9 percent expected the rise in airfares will be the highest since fiscal 2013, which had seen then Kingfisher Airlines going bust, it said.

“This is way below the 14 percent growth logged in fiscal 2019 and the compound annual growth rate of 18 percent was seen in the last five years. Nevertheless, is higher than our earlier estimate of 2 percent growth and factors an upward revision in capacity addition plans of low cost carriers,” Crisil added.

Even if Boeing 737 Max aircraft, which have been grounded globally since March following two fatal crashes, resumes operations after first half of 2019-20, the domestic passenger traffic growth for the industry could grow faster by about 80-100 basis points at best to 7-9 percent it said.

The LCCs, led by a robust expansion of domestic capacity by SpiceJet and IndiGo, on their part are expected to post strong double-digit growth of 25-30 percent in passenger traffic for fiscal 2020, it said.

Consequently, Crisil Research expects domestic Passenger Load Factor for the industry to remain flat at around 86 percent in fiscal 2020, the rating agency said. PLF is a metric that measures how much of an airlines passenger-carrying capacity is used.

With the improvement in fares and a likely robust growth in passenger traffic for budget carriers, Crisil said it anticipates the earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs margin to rebound to 24-25 percent this fiscal from 15-16 percent in fiscal 2019.

The carriers operating margin had come off after touching a decadal high of around 30 percent in 2016, Crisil said adding the recovery this time will be led by a significant jump in airfares due to sudden squeeze in capacity by airlines, following the grounding of the Jet Airways.

With the improvement in Ebitdar margin, the LCCs operating cash flows are expected to touch a decade high of Rs 4,700-5,200 crore this fiscal, Crisil Research said.

Also read: Jet Airways Insolvency: Two Entities Shortlisted To Submit Bids

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