A combination of discounted fares, positive business sentiment and last year's low base the factors
The growth of domestic air travel, which shot up as high as 30.3% in September this year compared with the same month last year, is baffling some aviation experts. They wonder whether it has run ahead of itself by not keeping pace with GDP growth rate.
For October and November, air traffic grew 20.6% and 16.9%, respectively.
"This kind of growth (in local domestic air travel) is inexplicable. Generally, the growth rate in air travel is twice that of GDP growth rate. This thumb rule applies only if growth in GDP is minimum 6%. GDP growth below that, usually, leads to negative air travel growth like it happened last year when it slipped into the negative zone," said Bengaluru-based aviation consultant Pankaj Pandit.
Last year, there was a negative 3% growth in air passengers during January-November to 53.44 million from 55.03 million in 2012. In comparison to this, GDP saw sub-5% growth.
This year, GDP growth in September quarter wasn't considerably higher than last year's at 5.3% but air travel zoomed to 30.3% and has been growing above 15% since then.
So, what is behind this?
An industry analyst, who did not want to be named, said he could think of only discounted fares as the reason for air travel growth zooming up this way.
"Fares have gone down over 20% this year from last year because of deep discounts offered by SpiceJet and other local carriers. That is the only reason I can think for it (growth in air travel). Jet fuel prices are down (26% since June) but air travel is not directly linked to it," he said.
SpiceJet, which rationalised its operations by cutting its fleet size, flooded the market with aggressive sale offers during the current year compelling other airlines to follow suit to protect their market share.
A senior executive with the Indian arm of International Air Travel Association (IATA), who did not want to be named, said the market was primarily stimulated by discounted fares but it was also supported by positive business sentiment, which has led to increase in discretionary spend.
Additionally, he said last year's low base was helping the "statistics look good".
"Nowhere, in my recent memory, have I seen fares discounted so deeply. These sales have led to a lot of forward booking. The second reason is a change in business sentiment. Even though it is not reflected in the output, there is optimism on business environment improving, which has led to the rise in discretionary spend, and some of it is trickling into air travel," said the IATA executive.
According to him, air traffic had hit the bottom last year after the Kingfisher Airlines debacle, pushing last year's base so low that this year's growth is appearing phenomenal.
He believes this year's air traffic growth must be inclusive with sale offers propelling leisure air travel and revival of positive business sentiments providing tailwind to business air travel.
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