India's newest airline Fly91 takes to the skies

Union Minister for Civil Aviation and Steel Jyotiraditya M. Scindia today flagged off the maiden flight of Fly91, a regional airline, between Manohar International Airport (MOPA), Goa and Agatti Islands, Lakshadweep.

In the past 10 years, the leadership of Prime Minister Narendra Modi brought a new dawn to this industry which resulted in the birth of six new regional airlines, Scindia says, adding that earlier airlines' closure and bankruptcy used to be the news. To be clear, low-cost carrier Go First filed for bankruptcy in May last year.

Scindia reiterated the government's commitment to connecting tier-2 and tier-3 cities through the UDAN scheme and said that the aviation industry is expecting to raise its domestic traffic to 30 crores by 2030 which was just 6 crores in 2014.

Fly91's scheduled flights will commence from March 18, 2024, between Manohar International Airport, Goa and Bengaluru, Hyderabad, Jalgaon, Agatti, Pune, Nanded and from Bengaluru, Hyderabad, and Pune to Sindhudurg, Jalgaon, Nanded and Goa, in a phased manner.

"These new connections will fulfil the demand for enhanced connectivity across the nation and increase accessibility of different regions. This will not only enhance tourism but also promote trade and commerce and give strength to the government’s commitment to offering an affordable, on-time, safe, and hassle-free travel experience to the passengers," says the Ministry of Civil Aviation.

India's domestic air passenger traffic is expected to grow 8-13% in FY24 to 150-155 million, surpassing the pre-COVID levels of 141.2 million seen in FY20, according to ICRA. The rating agency maintains a 'Stable' outlook on the Indian aviation industry, amidst the continued recovery in domestic and international air passenger traffic, and a relatively stable cost environment.

The momentum is expected to continue in FY25 as well, with a similar estimated growth, aided by rising demand for both leisure and business travel and improving airport infrastructure. The international passenger traffic for Indian carriers surpassed the pre-COVID levels in FY23, although it trailed the peak levels of 25.9 million witnessed in FY2019. It is expected to cross this level in the current fiscal, with an estimated 25-27 million passengers, representing a growth of 7-12%, says ICRA.

“The industry has witnessed improved pricing power, as reflected in increase in yields and thus the spread between revenue per available seat kilometre – cost per available seat kilometre (RASK-CASK) for the airlines. The same is expected to remain favourable, aided by a decline in aviation turbine fuel (ATF) prices and the relatively stable foreign exchange rates,” says Suprio Banerjee, vice president and sector head – Corporate Ratings, ICRA Limited.

The industry is thus estimated to report a significantly lower net loss of ₹3,000-4,000 crore in FY24 and FY25 compared to ₹17,000-17,500 crore in FY23, Banerjee says.

ATF prices have a major bearing on the airlines' cost structure. The average ATF price stood at ₹103,547/KL in the eleven months of FY24, a decline of 15% compared to ₹120,978/KL in FY23. However, this was 60% higher compared to an average of ₹64,715/KL during FY2020. Fuel accounts for around 30-40% of the airlines' expenses.