• Fuel price rise to impact industry profitability: ICRA

    ‘As per ICRA estimates, ATF price increase has resulted in the fuel cost per ASKM (CASK) of the domestic aviation industry increasing to Rs. 1.05 in June 2016 from a low of Rs. 0.82 in February 2016. This is expected to dent profitability of the airlines in Q1FY2017’, says Subrata Ray, Sr Group VP, ICRA Limited.

    Domestic passenger traffic in June 2016 reported a robust YoY growth of 20.8%, primarily backed by low airfares on account of intense competition. Considerable decline in domestic aviation turbine fuel (ATF) prices over the last fiscal had provided buffer to the airlines to reduce airfares; however, the recent increase in ATF prices has partially curtailed the benefit.

    ‘As per ICRA estimates, ATF price increase has resulted in the fuel cost per ASKM (CASK) of the domestic aviation industry increasing to Rs. 1.05 in June 2016 from a low of Rs. 0.82 in February 2016. This is expected to dent profitability of the airlines in Q1FY2017’, says Subrata Ray, Sr Group VP, ICRA Limited.

    The industry continued to add capacity on domestic routes during the month, which reported a growth of 22.4% YoY backed by fleet expansion and scale-up by the airlines. The capacity addition is likely to grow at a healthy rate going forward as indicated by pending aircraft orders of various airlines. Despite the capacity addition and impact of off-peak season, the domestic industry reported adequate PLF of 81.0% in June 2016. Joe Thuney Jersey

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