Domestic air traffic growth slows to 5.4% in January-February

Published: March 19, 2020 12:50:58 AM

IndiGo has substantially curbed its international flights over the past month, and its passenger load factor stood at 88.3% in February.

Domestic air traffic grew nearly 9% month-on-month (m-o-m) in February, with capacity utilisation for major airlines improving.Domestic air traffic grew nearly 9% month-on-month (m-o-m) in February, with capacity utilisation for major airlines improving.

By Anwesha Ganguly

Domestic air traffic growth slowed to 5.42% year-on-year (y-o-y) during the first two months of 2020, 200 basis points lower than the growth a year ago. Domestic airlines carried 2.51 crore passengers during January-February. However, analysts fear the February data is not fully indicative of the massive disruption caused by the outbreak of the novel coronavirus in the aviation sector, and airlines would have to take significant measures to cope.

Domestic air traffic grew nearly 9% month-on-month (m-o-m) in February, with capacity utilisation for major airlines improving. Airlines including IndiGo, SpiceJet, GoAir, Vistara and Air India saw an improvement in passenger load factor largely “due to airlines offering promotional fares resulting in increased demand”, the Directorate General of Civil Aviation (DGCA) said. As uncertainty grows, airlines have already reached out to the government seeking support.

“February data is not representative of the times to come. It is difficult to estimate how bad it will be in the coming months, with little visibility on how the situation will evolve. We have seen major disruption in travel. One has to see how airlines will tide over the current situation. They will certainly need some support from the government. Irrespective of the balance sheet, airlines will have to rejig their cost structures,” said an analyst from SBICAP Securities.

The cost-cutting measures have already begun. GoAir, India’s fourth largest airline, was the first to send its staff on unpaid leave. The airline’s capacity utilisation (measured as passenger load factor) stood at 90.5% in February, but had to shut all its international routes from March 18 due to travel curbs around the world. The Tata-Group promoted Vistara on Wednesday said the airline has adjusted capacity for March and April due to reduced demand. The airline also shut its international operations till March 31.

IndiGo, India’s largest airline, with nearly 48% market share, has also implemented cost-cutting measures. “IndiGo pilots could either take leaves or get paid for overtime. We have told pilots to take their leaves, since the airline will no longer be paying for overtime or additional hours,” an airline executive told FE. Analysts expect a cash burn of Rs 1,500-1,800 crore per quarter for IndiGo as a result of curtailed operations and disruptions.

“Our sense is that IndiGo can sustain for a prolonged period of time, a year or so, if the situation continues to be this bad. But the same cannot be said for its peers. Airlines will require capital to survive this period, and few have that buffer,” the analyst said.

IndiGo has substantially curbed its international flights over the past month, and its passenger load factor stood at 88.3% in February.

Vistara’s passenger load factor stood at 88% in February, while AirAsia’s load factor was 83.6%. FE earlier reported that Vistara has also undertaken measures to discretionary spending like marketing expenses. “We expect the Tata Group to do a lot of hand-holding for Vistara and AirAsia. The government will have to pump in more money for Air India. But, SpiceJet may find it difficult since promoters may not have the ability to bring in the capital,” the analyst said.
India’s second largest airline, SpiceJet’s load factor stood at 93% in February.

Another aviation expert said airlines are expected to close the financial year in red, but a clearer picture of the financial impact of COVID-19-related disruptions will only emerge by the first quarter of the coming financial year.

“We were expecting FY20 to be a good year for the sector, but with the economic slowdown impacting them in the third quarter and now an unprecedented situation with the coronavirus outbreak, things look very uncertain,” he said.

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