Domestic air demand falls 6.3% in July, weakest among major markets

The decline extended a downward trend that began in June, pointing to continued weakness in the domestic air travel market despite airlines maintaining relatively healthy passenger load factors.

To manage the drop in demand, airlines cut domestic seat capacity by 6% during the month. The capacity reduction helped cushion the impact on load factors, which remained at a relatively healthy 82.7%, declining by only 0.2 percentage points year-on-year.

The sharp contraction in India stood in contrast to a strong recovery in China, where domestic passenger demand increased 5.3% during July. India’s domestic market also underperformed other major aviation markets, with only minor contractions recorded in the US and Australia.

The July figures underline the widening divergence in the performance of major domestic aviation markets, with India continuing to face pressure even as some markets show signs of recovery.

The reduction in capacity by Indian airlines appears to have helped maintain seat occupancy levels despite weaker passenger demand. However, the 6.3% decline in traffic indicates that the industry continues to face a demand-side challenge.

The June-to-July decline also marks a sustained softening in domestic demand rather than a one-month fluctuation. Airlines’ decision to reduce available seats has so far prevented a sharper deterioration in load factors.

Globally, the performance of domestic markets remained mixed in July, with China recording a notable rebound while the US and Australia posted relatively modest contractions.

For India, the combination of falling demand and capacity cuts will remain a key indicator of the health of the domestic aviation market in the coming months, particularly as airlines calibrate schedules and capacity to changing passenger demand.