New Delhi [India], October 29 (ANI): India's domestic air passenger traffic is showing signs of improvement in October, with the pace of decline expected to ease to 4-5 per cent year-on-year, supported by festive travel demand and airlines restoring flight capacity, according to an equity research report by Jefferies.

The report said the improvement comes after four consecutive months of declining domestic passenger traffic.

'After a 6% YoY decline in departure pax in 2Q, Oct MTD is tracking a narrower estimated 4-5% decline, while rising MoM, supported by airlines reinstating some capacity & festive-led demand,' Jefferies said in its report.

The brokerage noted that passenger traffic had shown a similar recovery during the festive season last year.

'In CY25, traffic rebounded to positive YoY growth in Oct-Nov after declines seen during Jul-Sep, before falling again in Dec amid IndiGo's scheduling crisis,' the report stated.

The latest improvement follows continued weakness in the domestic aviation market during the July-September quarter, when passenger traffic declined 6 per cent year-on-year amid capacity reductions by airlines.

IndiGo's domestic passenger traffic fell 5 per cent year-on-year in September, while Air India recorded a 9 per cent decline. International passenger traffic carried by Indian airlines also remained under pressure, falling 11 per cent during the month.

However, the outlook for airlines remains challenging as rising aviation turbine fuel (ATF) prices threaten to increase operating costs.

Jefferies said the ongoing conflict in West Asia had pushed global jet fuel spot prices 17 per cent above their July-September quarter average.

'The West Asia conflict continues to drive jet fuel prices higher,' the brokerage noted.

The report also indicated that higher fuel costs and lower aircraft utilisation could weigh on airline profitability despite an improvement in passenger yields.

'For IndiGo, fuel inflation and geopolitical uncertainty complicate capacity & pricing decisions,' Jefferies said.

The report cautioned that prolonged hostilities in West Asia could extend earnings pressure on airlines, with a sustained recovery also dependent on an easing of geopolitical tensions.

While the October estimates point to a moderation in the decline in domestic passenger traffic, the report suggests that rising fuel costs remain a key challenge for the sector. (ANI)