CRISIL Ratings forecasts 20% operating profit growth for Indian airlines industry in FY25
CRISIL Ratings. This comes after a notable increase this fiscal year, fuelled by a robust recovery in passenger traffic, the ability to adjust volatile fuel prices, and stability in foreign exchange rates.
This will support their credit metrics despite a significant increase in debt (including lease liabilities) expected through this and the next fiscal years to fund fleet additions. An analysis of three airlines, which account for two-thirds of India’s air traffic, indicates as much.
«Passenger traffic should ascend 18–20% this fiscal (on-year), comfortably surpassing the pre-pandemic level, with business and leisure travel soaring. This trajectory is expected to sustain next fiscal, too, given economic growth,» said CRISIL in a release.
The rise in passenger traffic has strengthened the ability of airlines to pass on fuel costs (comprising 40-50% of the total cost) to flyers. This is reflected in the gross margin, which remained stable despite fuel prices more than doubling in the last three fiscals, CRISIL said.
Another factor supporting improvement in profitability is lower foreign exchange (forex) losses compared with last fiscal, driven by a relatively steady exchange rate, it said.
Forex volatility impacts the profitability of airlines as two-thirds of their total debt (including lease liabilities) and about a third of their total costs are denominated in foreign currency.
“Next fiscal, operating profit growth is expected to be in the vicinity of 20% from Rs 18,000-20,000 crore estimated this fiscal,
