Even in turmoil, India’s aviation industry has been adding new capacity faster than the growth in air passenger traffic.
The number of domestic passengers flown every month by Indian airlines has grown in double digits for four-and-a-half years till February, according to the Montreal-based International Air Transport Association (IATA).
Despite this growth, the industry’s passenger load factor (PLF), a measure of capacity utilisation, has been falling recently as carriers expanded their fleet. In fact, from October 2018 to February this year, Indian aviation’s PLF has been declining on a year-on-year basis, according to the latest IATA figures.
A high load factor means fewer seats on flights are being left empty. This is crucial for the price-sensitive industry, which has thin profit margins in India. PLF here is the highest among major aviation markets, including the US, China, and Brazil.
But since November, Indian airlines’ PLF has declined the fastest. This is due to a greater rise in capacity than air traffic, said Ashish Nainan, aviation analyst at CARE Ratings, even at a time when many of the Indian carriers are either stuck in or emerging from the red.
Deliveries have begun rolling in on the massive orders that carriers such as IndiGo, Air Vistara, and SpiceJet had placed with aircraft makers. The airlines have also been increasing the number of their flight routes and frequencies amid a push by the Indian government to expand regional air connectivity.
Meanwhile, though still in double digits, the rate of growth in passenger traffic has fallen 5% since October. The Indian government policies have forced airlines to raise their fares, leading to a drop in the load factor, said Mark Martin, founder and CEO of Martin Consulting.
“After GST, the government has increased airport charges. Then there’s been an 18-20% rise in service charges, from catering to fuelling services,” he said. “The costs have gone up, so the fares will also go up.”
05/04/19 Kuwar Singh/Quartz
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The number of domestic passengers flown every month by Indian airlines has grown in double digits for four-and-a-half years till February, according to the Montreal-based International Air Transport Association (IATA).
Despite this growth, the industry’s passenger load factor (PLF), a measure of capacity utilisation, has been falling recently as carriers expanded their fleet. In fact, from October 2018 to February this year, Indian aviation’s PLF has been declining on a year-on-year basis, according to the latest IATA figures.
A high load factor means fewer seats on flights are being left empty. This is crucial for the price-sensitive industry, which has thin profit margins in India. PLF here is the highest among major aviation markets, including the US, China, and Brazil.
But since November, Indian airlines’ PLF has declined the fastest. This is due to a greater rise in capacity than air traffic, said Ashish Nainan, aviation analyst at CARE Ratings, even at a time when many of the Indian carriers are either stuck in or emerging from the red.
Deliveries have begun rolling in on the massive orders that carriers such as IndiGo, Air Vistara, and SpiceJet had placed with aircraft makers. The airlines have also been increasing the number of their flight routes and frequencies amid a push by the Indian government to expand regional air connectivity.
Meanwhile, though still in double digits, the rate of growth in passenger traffic has fallen 5% since October. The Indian government policies have forced airlines to raise their fares, leading to a drop in the load factor, said Mark Martin, founder and CEO of Martin Consulting.
“After GST, the government has increased airport charges. Then there’s been an 18-20% rise in service charges, from catering to fuelling services,” he said. “The costs have gone up, so the fares will also go up.”
05/04/19 Kuwar Singh/Quartz
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