Thursday, March 19, 2020

Domestic air traffic growth slows to 5.4% in January-February

Domestic air traffic growth slowed to 5.42% year-on-year (y-o-y) during the first two months of 2020, 200 basis points lower than the growth a year ago. Domestic airlines carried 2.51 crore passengers during January-February. However, analysts fear the February data is not fully indicative of the massive disruption caused by the outbreak of the novel coronavirus in the aviation sector, and airlines would have to take significant measures to cope.
Domestic air traffic grew nearly 9% month-on-month (m-o-m) in February, with capacity utilisation for major airlines improving. Airlines including IndiGo, SpiceJet, GoAir, Vistara and Air India saw an improvement in passenger load factor largely “due to airlines offering promotional fares resulting in increased demand”, the Directorate General of Civil Aviation (DGCA) said. As uncertainty grows, airlines have already reached out to the government seeking support.
“February data is not representative of the times to come. It is difficult to estimate how bad it will be in the coming months, with little visibility on how the situation will evolve. We have seen major disruption in travel. One has to see how airlines will tide over the current situation. They will certainly need some support from the government. Irrespective of the balance sheet, airlines will have to rejig their cost structures,” said an analyst from SBICAP Securities.
The cost-cutting measures have already begun. GoAir, India’s fourth largest airline, was the first to send its staff on unpaid leave. The airline’s capacity utilisation (measured as passenger load factor) stood at 90.5% in February, but had to shut all its international routes from March 18 due to travel curbs around the world. The Tata-Group promoted Vistara on Wednesday said the airline has adjusted capacity for March and April due to reduced demand. The airline also shut its international operations till March 31.
IndiGo, India’s largest airline, with nearly 48% market share, has also implemented cost-cutting measures. “IndiGo pilots could either take leaves or get paid for overtime. We have told pilots to take their leaves, since the airline will no longer be paying for overtime or additional hours,” an airline executive told FE. Analysts expect a cash burn of Rs 1,500-1,800 crore per quarter for IndiGo as a result of curtailed operations and disruptions.
19/03/20 Anwesha Ganguly/Financial Express
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