Notwithstanding the ongoing turbulence due to rise in fuel prices, the domestic airline industry has been able to grow at a steady pace. India's domestic aviation market topped the growth chart for the 12th time in 13 months in July, posting its 47th consecutive month of double-digit growth at 18.3 per cent.
Meanwhile, China's growth performance wasn't far behind that of India, with domestic revenue passenger kilometres or RPK up 14.8 per cent compared to July 2017.
According to air passenger market analysis by International Air Transport Association (IATA), demand continues to be supported in both cases by structural changes, including ongoing rises in living standards, as well as sizeable increases in the number of airport connections within the respective countries. The latter translates into time savings for passengers and has a similar impact on demand as reductions in fares.
Ratings agency ICRA had last month said the only saving grace for the sector is the robust passenger load factors (PLFs) registered on the back of adequate demand, the report added that "the domestic passenger traffic to grow at a healthy pace of about 15 per cent annually... due to conducive factors like relatively low penetration levels, favourable macro-economic environment, support from regulatory environment and development of new airports."
The airline industry is also facing headwinds due to slide in the value of Indian rupee. The aggregate loss of the aviation sector is expected to reach Rs 3,600 crore in 2018/19, up from around Rs 2,500 crore in 2017/18. The reasons for the higher losses include higher aviation turbine fuel (ATF) prices, slowdown in capacity addition, and lower yields.