New Delhi [India], July 4 (ANI): International Air travel by Indian carriers is showing signs of recovery as geopolitical tensions in West Asia ease, while domestic passenger demand remains resilient despite continued capacity additions, creating a more favourable operating environment for airlines, according to an Equirus Securities aviation sector report.

The report said easing tensions in West Asia have helped airlines gradually restore international operations, while lower global aviation fuel prices have provided some relief on costs.

'Easing geopolitical tensions in West Asia facilitated a gradual normalization of international flight operations, supporting a recovery in international traffic,' the report said.

International passenger traffic carried by Indian airlines rose to around 2.3 million in May, up 24 per cent from the previous month. Flight departures increased 22 per cent sequentially, while passenger load factor (PLF) improved to 76.6 per cent, indicating that demand recovered faster than capacity additions during the month.

The report also highlighted that the domestic market remained robust, with passenger demand continuing to outpace capacity growth.

'Strong demand absorption outpaced capacity growth, resulting in PLF improving to ~85.9 per cent... highlighting healthier aircraft utilization,' the report said.

Domestic passenger traffic increased to about 15.4 million in May, up 10 per cent year-on-year and 11 per cent month-on-month, while flight departures rose 5 per cent from a year earlier. Capacity, measured by available seat kilometres (ASKs), increased 8 per cent year-on-year, suggesting airlines were able to fill additional seats despite expanding networks.

On the cost front, the report said airlines received some relief as global fuel prices corrected sharply during the month. Brent crude averaged around USD 72.9 per barrel, down 21 per cent month-on-month, while Singapore jet fuel prices declined 12 per cent sequentially.

However, it cautioned that the weak rupee continued to put pressure on airline finances.

'The INR remained weak at ~94.7/USD... continuing to exert pressure on dollar-denominated expenses such as aircraft leases, maintenance and other operating costs despite a modest sequential improvement,' the report said.

The report also pointed to changing competitive dynamics in the industry. IndiGo retained its leadership in the domestic market with a passenger market share of 64.8 per cent, while the Air India Group's share improved sequentially to 25.7 per cent. Akasa Air continued to gradually expand its domestic presence.

In the international market, IndiGo strengthened its position further.

'IndiGo's international passenger market share increased to ~52.5 per cent... reflecting faster normalization of its international network and capacity deployment,' the report said, adding that Air India Group's share moderated during the month.

The report also noted that IndiGo continued to lead the industry in operational performance, recording an on-time performance (OTP) of 88.5 per cent in April, while Air India Group improved its OTP to 82.4 per cent, reflecting better operational execution. (ANI)