Friday, July 3, 2020

Corona impacts aviation industry’s growth


PUNE (NEW DELHI): The Government’s suspension of all air services both domestic and international, following outbreak of Covid-19 pandemic, is expected to impact the aviation industry’s growth prospects severely.

In fact, as per an ICRA study, though restricted recommencement of domestic air traffic has begun, this will in no case help the industry to recover the lost ground in FY2021. However, H2 FY2021 will witness some recovery, with Q4 FY2021 witnessing Y-o-Y de-growth of just 3-14% in domestic passenger traffic with improved passenger load factors (PLFs).

Overall FY2021 is expected to witness ~41-46% de-growth in domestic passenger traffic. The impact of the Covid outbreak will be more profound and last longer on international travel compared to domestic travel. Thus, FY2021 international passenger growth for Indian carriers is likely to witness a significant Y-o-Y de-growth of ~67-72%, with the traffic expected to improve sequentially, with Q4 FY2021 likely to witness Y-o-Y de-growth of 30-40%. 

All scheduled domestic passenger air services had been suspended for two months - from March 25 to May 25, 2020. Subsequently, the scheduled domestic flights recommenced operations with effect from May 25, 2020 to a limited extent i.e. maximum 1/3rd of their respective approved capacity of Summer Schedule 2020.

Giving further analytical insights, Kinjal Shah, Vice President, ICRA, says, “The domestic passenger traffic has gradually increased from 30,550 on Day 1 (of recommencement) with a peak of 72,583 on Day 21. Since then, the same has remained above 58,000 (till Day 37 i.e. June 30, 2020). In the similar period, the number of flights departing has also gradually increased from 416 on Day 1 to 723 on Day 37, with a peak of 826 flights on June 22, 2020. However, this is significantly lower than the average daily departures of 2,882 flights in June 2019. The domestic airlines are operating at a lower capacity – total 21,696 departures in June 2020, as against 86,456 departures in June 2019, resulting in a 74.9% Y-o-Y reduction in capacity deployment. For June 2020, the domestic passenger traffic was 19.5 lakh, as against 119.9 lakh in June 2019, a Y-o-Y de-growth of 83.7%. The average number of passengers per flight during June 2020 was 90, as against an average of 139 passengers per flight in June 2019.

To ensure that the airlines do not charge excessive fares and also to ensure that the journey is performed only for essential purposes, the Ministry of Civil Aviation (MoCA) has fixed a fare band within which the airlines are supposed to charge fares. The restrictions on capacity and fares are valid till August 24, 2020.

The scheduled international operations are expected to start only once the domestic traffic reaches 50% and all stakeholders like airports and State Governments are ready to expand. However, under the Vande Bharat Mission (VBM) for evacuation of Indian citizens from foreign shores, which started from May 07, 2020, the international passenger traffic (inbound and outbound) has been 2,26,675 for the period May 07, 2020 to June 30, 2020 (de-growth of 93.7% over May and June 2019).


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