After seeing a 12-year high traffic growth at 7.9% in the first six months of 2017,Indian airlines, is likely to see a slowdown in growth because of fuel price increase and a marginal slowdown in the economy, reported Livemint.
“You would expect it to slow because the economy has slowed — not very much — and we are getting towards the end of big stimulus from the fall in oil prices,” International Air Transport Association (IATA) chief economist Brian Pearce told the newspaper.
A sound economy and low airfares had kept the demand for air travel strong until May (7.9%) despite it being slightly low compared to May 2016 (8.1%). However, with possibilities of rising fuel prices in near future, the pace of growth is likely to decline.
Earlier this month, the oil prices fell with rising US fuel inventories pulling US crude back below USD 50 per barrel, while ongoing high supplies from producer club OPEC weighed on international prices.
“Fuel prices will remain sideways. Earlier it looked like Opec cuts would lead to prices rising but US shale oil producers have balanced that out. Perhaps next year you would see pressure on it,” he said.
Nevertheless, IATA is positive about its earlier prediction that India will replace the UK as the third-largest aviation market by 2026 with air passenger traffic of 442 million by 2035, an increase of 322 million passengers from the current figures.
According to IATA, Indian airlines market, which is among the top five fastest-growing market, is likely to grow by more than 8% each year on average over the next 20 years, doubling in size each decade.