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Business News/ News / India/  Aviation takes flight to profit as demand soars

Aviation takes flight to profit as demand soars

Among those scoring a turnaround is state-run Airports Authority of India (AAI), which expects to report a net profit of ₹1,900 crore for FY23, mirroring the success of airlines in the third quarter.

Aviation takes flight to profit as demand soarsPremium
Aviation takes flight to profit as demand soars

NEW DELHI : Indian airlines and airport operators are swinging back to profit after a challenging two years when the pandemic sapped demand for air travel.

Among those scoring a turnaround is state-run Airports Authority of India (AAI), which expects to report a net profit of 1,900 crore for FY23, mirroring the success of airlines in the third quarter.

IndiGo, India’s largest airline by market share, has announced record profit, and privately-held Vistara said it has broken even for the first time since inception. SpiceJet Ltd also unexpectedly reported a fourfold jump in net profit to 106.8 crore. AAI’s profit surge is being aided by the better performance of privately run Delhi and Mumbai airports that share a certain percentage of revenues with the state-owned airport operator.

“Due to good improvement in air traffic (aircraft and passenger movements) during FY2022-23 as compared to FY 2021-22, it is estimated that AAI will be able to generate net profit during FY 2022-23," a spokesperson for AAI said in response to a query. “As per revised estimates of AAI for the FY2022-23, it is expected that AAI is set to post a net profit of approximately 1900 crore," he added.

Government data showed airports in India handled 267 million passengers in the 10 months to January, an 82% jump from a year earlier. This is about 91% of the traffic seen in the same period during the pre-covid year of 2019-20.

Mint reported on 21 February that the sector was witnessing its best-ever quarter in terms of passengers flying in February. The fiscal fourth quarter has traditionally been a low-demand period for the sector in India. India’s average daily domestic air passenger numbers in February rose to more than 420,000 from 410,000 in December. Average daily passengers in January and February have also been higher than the figures recorded in the festival months of October and November at 370,000 and 390,000, respectively, Mint reported.

For the fiscal ended March 2022, AAI reported a meagre profit of 8.8 crore on revenue of 6,841 crore. It reported its first loss in 25 years of operations at 1,962 crore in 2020-21 due to weak demand for air travel as a result of the pandemic. In the non-covid year of 2019-20, AAI posted a profit of 1,985 crore on revenue of 12,837 crore.

The state-run airport operator had sought a waiver on the annual dividend for FY22 due to low profits but is expected to pay 30% of the net profit to the Union government in FY23, a person in the know said.

AAI manages over 100 airports and provides air space management services to domestic and international airlines, including those overflying Indian airspace.

Air travel in India has continued to surge in 2022-23, especially since the October quarter, and has created a new post-covid record in February, with an unexpectedly robust showing in what is typically one of the slowest periods for airlines. This is largely due to a rebound in corporate travel and demand from events such as the G20 meetings and the Aero India show.

Analysts predict passenger numbers to achieve new highs and add to the sector’s profitability. “The overall air passenger traffic is likely to reach 325-330 million passengers in FY2023 on the back of strong rebound, healthy momentum in domestic passenger traffic and the uptick in international passenger traffic... Further, the overall passenger traffic is expected to witness a growth of 12-13% in FY2024," said Vinay Kumar G, vice president and sector head of corporate ratings at Icra Ltd. “The operating margins are expected to improve to 32% levels in FY2023 as compared to 29% in FY2022 and operating losses in FY2021," he added.

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Published: 03 Mar 2023, 06:45 PM IST
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