The profit margins will remain under pressure due to the increase in costs and the limited ability of the airlines to pass on the same to the consumers, stated ICRA.

ICRA believes that the domestic yields have increased by 25–30% over pre-covid levels.

The Indian aviation industry is witnessing headwinds from the rising fuel costs along with the depreciation of the INR against the USD, which has escalated the overall costs for the industry, according to rating agency ICRA.

As per ICRA note, the near-term revenue growth will be supported by passenger traffic growth which has witnessed a notable recovery over the last few months with a steady rise in leisure and business travel subsequent to the waning scare of the pandemic; and the commencement of international travel operations for Indian carriers with effect from March 27, 2022.

However, profit margins will remain under pressure due to the increase in costs and the limited ability of the airlines to pass on the same to the consumers.

The impact of the increase in ATF prices on the industry’s operating profit margins (OPM) depends on the industry’s ability to pass on the same to the customers.

As per ICRA analysis, if the fuel cost increases by 30% from FY2022 levels and the industry can pass on only 10% of the increase by way of a rise in fares, the industry's OPM will moderate by a whopping 10%.

ICRA believes that the domestic yields have increased by 25–30% over pre-covid levels. The cost headwinds will result in an increase in air fares; however, it will be limited by the intense competition and endeavour of airlines to maintain and/or expand their market shares.