ICRA report: Indian aviation industry set for takeoff despite engine issues

New Delhi, April 12 (IANS) – The Indian aviation industry is expected to soar to greater heights despite facing challenges such as supply chain issues and engine failures, according to a recent report by ICRA Limited. The report highlights the impact of engine problems on airlines and the industry’s growth prospects.

The report mentioned that in FY2024, Go Airlines (India) Limited had to ground half of its fleet due to faulty P&W engines, leading to operational disruptions. Meanwhile, IndiGo also faced challenges with more than 70 aircraft grounded due to Pratt & Whitney engine issues. This led to a significant number of Indian airlines grounding 24-26% of their total fleet by March 31.

With global engine recalls and other OEM engine issues, the testing process by P&W is expected to take longer, resulting in increased operating expenses for airlines. This includes higher lease rentals due to additional aircraft being leased to replace grounded capacity, rising lease rates, and reduced fuel efficiency. However, healthy yields and passenger load factors along with OEM compensation may mitigate some of these impacts.

Despite these challenges, the capacity deployment for March 2024 showed a growth of 1.8% compared to March 2023 with higher departure numbers. The domestic air passenger traffic in March 2024 also increased by 4.9% year-on-year and 6.9% sequentially from February 2024.

The report also highlighted the financial stress faced by airlines, with some having sufficient liquidity or strong parent support to maintain credit profiles. However, the credit metrics and liquidity profiles of other airlines remain under pressure. In particular, Go Airlines (India) Limited faced payment defaults and filed for insolvency, leading to a moratorium on its assets.

With the NCLT extending the deadline for the completion of the resolution process for GoFirst, the airline’s future remains uncertain. The extension granted until June 3, 2024, provides additional time for the resolution process under the Insolvency and Bankruptcy Code. The aviation industry in India is expected to navigate through these challenges to achieve sustained growth in the coming years.