Monday, June 24, 2019

Aviation sector: Turbulence in wake of Jet Airways closure

The suspension of operations by Jet Airways, the country’s second-largest domestic airline, cast a shadow on the aviation sector’s performance in the last fiscal, with passenger traffic growth falling to a five-year low of 11.6% y-o-y in FY19. Passenger traffic had grown by 12.5-16.5% y-o-y in the 2014-18 period.

Full-service carrier Jet, which had 119 aircraft in its fleet in December, 2018, suspended all operations on April 17 owing to a financial crisis. This has had a ripple effect on passenger footfall and shipment of cargo at airports—domestic air traffic fell by 4.5% y-o-y in April, breaking a growth streak of over 55 months.

The top two airports—in Delhi and Mumbai—are the hardest hit by Jet’s closure as the airline had sizeable capacity deployed on tier-I routes. The two airports handle more than one-third of the total footfall at airports—of the 344.6 m passengers that used India’s 102 airports in FY19, over 118 m flew through the Indira Gandhi International Airport in Delhi and the Chhatrapati Shivaji International Airport in Mumbai in FY19.
While passenger traffic at the Delhi airport declined by 3% y-o-y in February, the Mumbai airport, the hub of Jet’s operations, has been reporting de-growth in passenger footfall since October last year. Traffic at airports in Bengaluru, Chennai and Kolkata has also been impacted. Apart from the Metro routes, Jet had won rights to operate on regional routes under the UDAN (Ude Desh ka Aam Naagrik) scheme, for which the Airports Authority of India has been developing airports across the country.
The void created by Jet’s exit can be gauged from the fact that the carrier flew more than 50,000 passengers every day during calendar year 2018, operating 650 flights daily. It was also the largest Indian carrier flying international routes. According to ratings agency ICRA, Jet’s grounding has brought down industry capacity by 14%. Analysing the impact of Jet’s shutdown, Kinjal Shah, the agency’s vice-president and co-head, Corporate Sector Ratings, says, “overall, the moderation in capacity starting February, 2019 has resulted in higher air fares—a 30-40% increase between September, 2018 and March, 2019 – and inconvenience to passengers. India being a highly price-sensitive market, it has also affected passenger traffic growth from October, 2018 onwards.”
24/06/19 Arun Nayal/Financial Express

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