The price-sensitive Indian air passenger will have to shell out more this fiscal year as fares are expected to rise due to limited capacity addition and the grounding of full service carrier Jet Airways with its fleet of 119 aircraft.
Rating agency Crisil Research says ticket prices are expected to rise 7-9% during the period, the highest since 2013, when another popular airline, Kingfisher, was grounded, Press Trust of India reports.
The agency has forecast that the growth of air passenger traffic within the country will be subdued, at 6-8% in this fiscal year, as against a robust 19% in the year ended March 2019.
In addition to the Jet Airways crisis, the global grounding of Boeing 737 Max aircraft since March, following two fatal crashes, has also hampered aircraft availability. Budget carrier SpiceJet was badly hit as it had 12 Boeing 737 Max aircraft in its fleet.
If Boeing 737 Max planes are allowed to fly later in the year it may help increase the air passenger growth by up to 1%, the agency opined.
As for capacity addition, the rating agency said it will be brought in mainly by low-cost carriers such as SpiceJet and IndiGo. The two airlines are expected to post strong double-digit growth of 25-30% in passenger traffic for fiscal year 2020, the agency added.
Crisil expects domestic passenger load factor for the industry to remain flat at around 86% in fiscal 2020. This is a metric that measures how much of an airlines passenger-carrying capacity is used.
The rating agency claimed that an increase in fares and a likely robust growth in passenger traffic will improve the account books of budget carriers. It expects the EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) margin to rebound to 24-25% this fiscal year from 15-16% in fiscal 2019.
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