Domestic air traffic de-grew 4.5% in April on Jet Airways closure, capacity constraints and soaring fares
After registering a scorching 20% per month average growth for five years in row, the domestic air traffic reported a de-growth for the first time in April as airlines battled capacity constraints and higher fares kept passengers away.
About 109.95 lakh passengers flew the domestic airlines during the peak month of April against 115.13 lakh passengers in the same month last year, a fall of 4.5%, according to the data by aviation regulator Directorate General of Civil Aviation (DGCA).
For the January-April quarter, the year-on-year growth was just 2.53% as 464.47 lakh passengers took domestic flights against 453.03 lakh during the year-ago period.
The April fall is not all of sudden, as even in the preceding months there were signs of a slowdown. In March, the passengers carried by the domestic carriers had increased by 0.14% and 5.62% in February.
The development has come has a bump to the country's domestic air traffic growth, which has been growing in double-digits for the past 55 months on rising incomes, rock-bottom airfares and enhanced capacity, among others. In order to capture market share, domestic airlines slashed fares on major routes.
The fares were one-third of what was charged by airlines in developed markets such as the US and Europe on comparable routes.
Devesh Agarwal, a Bengaluru-based aviation analyst, said the current slowdown is a reflection of the real situation and the double-digit growth in the past several years was artificially created by the carriers on the back of low fares. "The moment the fares started going up after the grounding of Jet Airways, passengers started moving to other modes of transport or reducing their travel," he said.
According to an estimate by aviation consultancy firm CAPA, the domestic traffic is expected to grow about 14-16% in the next financial year as the airlines are looking to add at least 90 planes during the period.
Analysts said the prime reason for the current capacity shortage is grounding of Jet Airways. The full-service carrier had about 119 planes in its fleet. Other airlines including SpiceJet, IndiGo and Air India, too, have grounded some of their planes due to operational reasons.
Mark Martin, CEO & founder of Dubai-based Martin Consulting had earlier said, "This has resulted in the shortage of about 180 planes in the system." Further, the airlines have slowed down on their plane induction plans, which has deteriorated the situation, an analyst said.
CARE Ratings, in its latest report on the aviation industry, said that the domestic passenger traffic growth during the year would moderate to lower double digits and higher single digits (8-12%) as fares remain high. With Jet Airways's entire fleet grounded post April 17, 2019, it would take a considerable time for the domestic airlines to make up for the extinguished seat inventory.
However, reduced competition and improved fares are being welcomed by the carriers as their operating margins are set to improve during this fiscal. "We do expect all airlines to report operating profits during fiscal 2020. Though the profitability would continue to largely depend on the crude oil prices," CARE said.
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The April fall is not all of sudden, as even in the preceding months there were signs of a slowdown. In March, the passengers carried by the domestic carriers had increased by 0.14% and 5.62% in February.
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