In its mid-year update, CAPA India has made significant revisions to its forecasts for the Indian aviation sector for the fiscal year 2024. Several key factors have prompted adjustments, impacting both domestic and international travel expectations, as well as overall industry profitability.
Domestic Traffic Forecast Revised Downward
The forecast for domestic air travel in FY2024 has been revised slightly downward, now anticipating approximately 155 million airline passengers, down from the initial estimate of 160 million. The revisions are attributed to a series of factors:
- GoFirst Airways Grounding: The abrupt grounding of GoFirst Airways has played a role in the adjustment, leading to a reduction in overall domestic capacity.
- Scaling Down of SpiceJet Operations: SpiceJet’s decision to scale down its operations has contributed to the revised forecast, impacting the overall domestic passenger count.
- IndiGo’s Focus on International Routes: IndiGo’s heightened focus on international routes has redirected capacity, influencing the domestic market dynamics.
- Aircraft Grounded Due to Supply Chain Issues: Unforeseen supply chain challenges have led to more aircraft being grounded than initially expected, affecting overall operational capacity.
- Unexpected Demand Weakness: Surprisingly weak demand during October and the first half of November has further influenced the downward revision in domestic traffic forecasts.
International Traffic Forecast Adjustment
The forecast for international air travel in FY2024 has been revised downward from the initial range of 72-75 million passengers to around 70 million. Factors influencing this adjustment include:
- Higher Number of Grounded Aircraft: An unexpectedly high number of aircraft on the ground, originally intended for international routes, has impacted the revised forecast.
- Supply Chain Issues for IndiGo: IndiGo’s operations have been affected by supply chain challenges, influencing its international capacity.
- Delayed Contribution of Air India’s A350s: Air India’s A350s, initially planned for international routes, will now be deployed on domestic routes for crew familiarization until Q1 of FY2025, affecting the revised international capacity for FY2024.
Profitability Outlook for the Industry
Despite these challenges, the overall profitability outlook for the Indian airline industry remains largely unchanged, with an expected loss of USD 1.6-1.8 billion for FY2024. However, there is a notable shift in the composition of these losses, with a higher Full-Service Carrier (FSC) loss and a lower Low-Cost Carrier (LCC) loss.
IndiGo’s Exceptional Performance
In contrast to the industry outlook, IndiGo is expected to stand out by reporting a record profit of USD 500 million, underscoring the airline’s resilience and strategic positioning.
Aircraft Grounding and Industry Implications
CAPA India’s mid-year update also highlights that, by the end of March 2024, up to 200 aircraft are anticipated to be grounded, constituting around 25% of the fleet on the register. The grounding is attributed to a combination of supply chain challenges, suspended operations, maintenance issues, and broader strategic considerations, signaling potential challenges for the industry in the coming months.
As the aviation industry navigates these complexities, stakeholders will closely monitor developments to adapt strategies and capitalize on emerging opportunities in this dynamic environment.
