This is the stuff every airline in the world dreams of.
On Friday, Air India had desperate passengers requesting the state-owned carrier to accommodate them on any of its flights so that they could fly out in time to enjoy a long weekend — on account of Diwali — with their friends and families.
But Jitendra Bhargava, executive director — corporate communications — Air India, said there just wasn’t enough seats available to take them all onboard.
“Today (Friday), we are grappling with a situation (at various airports) where passengers are scrambling to get seats on our flights,” he said.
A senior executive of a budget airline also said that most flights on the metro routes were operating at 100% load factors since last one week — that too at healthy yields —revenue realisation per seat.
This is in stark contrast to the situation last year, when airlines were barely able to fill up half of their planes because recession had pulled down demand for air travel and soaring aviation turbine fuel (ATF) prices had pushed up fares beyond the affordability levels of most fliers.
Then, there was also the perennial problem of overcapacity, which has for long spurred fare war in the domestic airline industry and kept the load factors of carriers low.
In the third quarter — October to December — of this fiscal, experts say that demand-supply scenario seems to be reversing. They feel there may be little or no supply overhang in the market in the December quarter as many airlines have aggressively trimmed fleet sizes and cut frequencies on several routes in the last one year.
Experts say it is this industry capacity snip, more than anything else, that caused the mad rush kind of situation for Air India on Friday.
Ankur Bhatia, managing director of Amadeus, said airlines were recording better load factors because the wide chasm between demand and supply was closing as a lot excess capacity had flown out of the market in the last one year.
“Over the last one year, many airlines have cut capacity while dip in jet fuel prices helped them (airlines) offer lower fares. This has improved the demand and supply scenario in the market as both have inched closer to each other,” he said.
Bhatia says on some of the domestic routes demand had already outstripped supply, and this was improving the overall yields, which have been subdued for some time now, of airlines.
According to the latest statistics put out by directorate general of civil aviation (DGCA) on Thursday, demand for air travel was up by around 31% in September as local carriers flew 8.37 lakh more passengers compared with the same month last year. On the hand, as per estimates of industry experts, industry capacity is down by around 25%, bringing demand and supply nearer to the equilibrium point.
Air India’s Bhargava says the gap between demand and supply can easily be bridged if no additional capacity is inducted.
“Our plan is to rationalise capacity that involves leasing out passenger aircraft and freighters. We will be taking deliveries of Boeing 777-ER and Airbus planes but those will not be incremental but will largely substitute our existing capacity,” he said.
“If at all, there will be 2% increase in our fleet size in the next 12 months.”
Jet Airways spokeswoman Srirupa Sen said her airline, which had slashed capacity last year, also has no plans to expand capacity.
“Like all other airlines, we are evaluation the situation. Three to four of our aircraft, which had been leased out to foreign carriers, will be returned soon. We may lease them out again,” she said.
And as demand and supply fly closer to each other, airlines are expecting to better their yields.
M Thiagarajan, managing director of Paramount Airways, said with industry flab being cut, yields were starting to look up. He said they were up marginally in October from September.
“Yields are slowly moving up and if the demand-supply situation improves further, some airlines may even be able to make money in current quarter. Though, it has to be seen how long this is sustainable,” said the chief of the Chennai-based business airline.
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