Tuesday, November 19, 2019

Overcapacity in skies pulls down fares, hurts airlines’ bottomline

New Delhi: The rush by airlines to add planes and launch flights on slots vacated by Jet Airways has led to overcapacity in the Indian market, slashed fares and losses piling up for carriers, senior airline executives told ET.
 According to the winter schedule, airlines have announced a high double-digit increase in capacity, filling the space created on key routes after Jet’s demise.
 “Jet’s exit was a much-needed capacity correction,” said a senior airline executive who did not want to be identified. “But the government forced capacity to come back by tying slots and rights allocation to incremental aircraft addition. This, coupled with a slowing economy, has resulted in the market not being able to go through the natural correction after Jet’s exit. It has put airlines back into a doom loop, with excess capacity, not enough places to fly aircraft profitably and deep losses. Exit of another airline is quite possible.”
 Overcapacity has kept fares under stress even during the festive season that sees an uptick in travel. While the number of passengers flying during October increased 4%, fares stayed lower than last year. Data from travel aggregator ixigo showed that average fares between routes such as Delhi-Mumbai and Delhi-Kulu were down by 9% and 54%, respectively, against last year. Some routes saw growth but not enough to offset overall losses.
 19/11/19 Mihir Mishra/Economic Times
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