Jet shutdown effect: Traffic growth lowest in 5 years, more trouble for airlines

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Published: September 1, 2019 6:22:27 AM

Expands at just 1.9% year-on-year in the first four months of FY20

jet airways, jet airways grounded, SpiceJet, sales of Jet tickets, jet airways slots, ICICI securities, passenger traffic, DGCA, international flying rightsTravel industry executives point out that airlines have added more capacities, measured in terms of available seat kilometres (ASKs) on the international routes, which face less competition as compared to domestic sectors.

Domestic air traffic growth in FY20 so far has been the slowest in the past five years. The passenger traffic, which witnessed high double-digit growth since 2014-15, has expanded at just 1.9% year-on-year in the first four months of FY20, largely due to closure of Jet Airways. As per analysts this muted growth is expected to continue till at least January next year.

“The low traffic growth in July 2019 is largely on account of lower capacity as Jet remains grounded. Additionally, full ramp-up of sales of Jet tickets, which moved to SpiceJet fleet, will take some time,” analysts at ICICI securities noted.  Aviation consultancy firm CAPA India has projected less than 5% y-o-y growth for the domestic market in FY20. However, airlines executives expect traffic growth to increase during the festival season. “July-September is a weak quarter for airlines. The July growth was mainly due to less capacity and fares being higher,” said an executive at a low-cost carrier.

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Jet commanded 15% of the domestic market share before the full-service carrier shut down due to liquidity crunch on April 17. Since then, SpiceJet and Vistara have inducted more than 40 aircraft which were earlier operated by Jet. The average domestic fares in FY20 are up 8% y-o-y, according to travel booking portal Cleartrip.

Travel industry executives point out that airlines have added more capacities, measured in terms of available seat kilometres (ASKs) on the international routes, which face less competition as compared to domestic sectors. “The passenger traffic growth requires steady increase in capacities by airlines. The traffic was increasing by 19% in 2018 when overall capacities grew at 21%. In this current financial year, the capacity has grown by only 3% y-o-y.

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Moreover, the airlines are deploying additional capacities on the lucrative international routes,” Balu Ramachandran, senior vice-president, Cleartrip, explained. While international capacities at IndiGo grew at 90% y-o-y, SpiceJet is adding overseas ASKs at 80%, followed by Go Air, the DGCA data stated.

Indiver Rastogi, president and group head, global business travel, Thomas Cook, however, is positive, saying the airlines have lapped up slots on key domestic routes. “We are seeing robust growth in our bookings. The sentiment for travel is positive and there is good uptake for international destinations. The fares which had shot up in Q1 have come down with airlines taking over Jet’s slots and international flying rights,” Rastogi pointed out.

Since April, SpiceJet has announced 130 additional flights that include 78 flights connecting Mumbai, 20 flights connecting Delhi and 12 flights connecting Mumbai and Delhi. It launched a number of new flights and enhanced frequencies on its international network from key metros to destinations such as Jeddah, Bangkok, Colombo, Hong Kong, Dubai and Dhaka.

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