The rise comes after the industry reported a 4.4 per cent "de-growth" in traffic in April.
"This is primarily attributable to the gradual increase in capacity as airlines like SpiceJet started redeploying some of the grounded aircraft of Jet Airways. This has, in turn, resulted in some moderation in the airfares during April 2019 and May 2019. For April-May FY2020, the domestic passenger traffic growth had reported a Y-o-Y de-growth of 0.5 per cent," it said.
According to the report, Indigo and SpiceJet, which together accounted for 62 per cent of the domestic airline industry capacity during April 2019, have added 15 and 25 aircraft, respectively, during April and May 2019, increasing seven per cent and 33 per cent, respectively, over their March 2019 fleet.
Kinjal Shah, Vice President and Co-Head, Corporate Sector Ratings, ICRA, said: "While Indigo has announced 30 per cent increase in its capacity in FY2020 (approximately half of which will be for domestic operations), SpiceJet has announced an increase of 80 per cent. As the airlines continue to expand their fleet, resulting in a gradual correction in the demand-supply imbalance and thus a further moderation in airfares, the domestic passenger traffic growth is expected to continue to increase."
In May 2019, all airlines reported a month-on-month improvement in their passenger load factors (PLFs), while on a year-on-year basis, only Air India and GoAir reported an improvement in their PLFs.
With capacity expansion planned by various airlines, the industry is likely to start facing pressure on yields and thus profitability, Shah said.
( With inputs from IANS )