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Indian aviation sector could see a gradual recovery in international traffic in the upcoming months even as domestic demand remains subdued, with sequential improvement in overseas passenger volumes and load factors pointing to a potential recovery ahead, according to brokerage firm Equirus.
The brokerage said international passenger traffic of Indian carriers rose 8 per cent month-on-month in August to around 2.6 million, while international revenue passenger kilometres (RPKs) increased 9 per cent. Demand growth outpaced capacity growth sequentially, lifting the international passenger load factor (PLF) by 106 basis points to around 77.2 per cent. "International passenger recovery accelerated sequentially, although traffic remained below last year," Equirus said, noting that international traffic was still 13 per cent below the year-ago level. Domestic demand, however, remained under pressure. Domestic passenger traffic declined 5 per cent year-on-year and 11 per cent month-on-month to around 12 million, while RPKs fell 5 per cent year-on-year and 12 per cent month-on-month. Capacity also moderated, with available seat kilometres (ASKs) declining 9 per cent sequentially and flight departures falling 8 per cent year-on-year. With demand declining slightly faster than capacity, domestic PLF moderated to around 83.1 per cent, down 256 basis points month-on-month, although it remained 27 basis points higher than a year earlier. Cost pressures continue to pose a key challenge for airlines. Brent crude stood at around USD 90.1 per barrel in August, up 32 per cent year-on-year, while Singapore jet fuel prices surged 83 per cent year-on-year to around USD 154.7 per barrel. The rupee also weakened to around Rs 95.7 per US dollar, keeping pressure on dollar-denominated expenses such as aircraft leases and maintenance. In the competitive landscape, IndiGo strengthened its domestic market share to around 67.2 per cent, up 212 basis points year-on-year. Air India Group's domestic share stood at around 24.2 per cent, down 220 basis points year-on-year. However, Equirus cautioned against interpreting monthly domestic share movements as structural competitive gains. Air India Group's international share rose to 43.2 per cent sequentially, while Akasa Air's international share increased to 4.2 per cent. "Overall, the contrasting domestic and international share movements suggest near-term realignment of capacity amongst the carriers," Equirus said. The brokerage noted that IndiGo is relatively more domestic-oriented, while Akasa Air is increasingly deploying capacity internationally. The evolving capacity mix, alongside improving international demand, could shape competitive dynamics in the sector in the coming months. (ANI)
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