Monday, July 20, 2020

Why air travel in India may shrink further

Analysts and rating agencies seem to affirm what many had already dreaded. The Indian aviation sector will be sucked into an air pocket that will further aggravate its problems.

Curtailed mobility of people due to the Covid-19 pandemic and related restrictions will shrink India’s air passenger traffic in both domestic and international sectors by 40-45 per cent and 60-65 per cent, respectively, this fiscal, according to Crisil. The demand destruction can be gauged from the fact that even after resumption of domestic air services, the load factor is hovering at 50-60 per cent, with the primarily unidirectional flow of traffic, limited largely to essential travel and those returning to their home cities or countries.
In the milieu, Indian carriers are expected to log operating losses this fiscal despite lower crude oil prices. And with the pandemic still raging in much of the world, a revival to pre-pandemic levels appears unlikely even in the next fiscal. This is a serious jolt to the Indian domestic air travel industry that had logged double-digit growth in seven of the past ten fiscals before its fortunes took a turn for the worse with the bankruptcy and grounding of a couple of major carriers, Crisil said. The number of domestic air passengers is expected to be 78- 83 million this fiscal, similar to fiscal 2016. In the first quarter, passenger demand was weak as air services, grounded since March 25, resumed only on May 25, and with capacity limitations in place. Domestic demand is likely to be subdued in the seasonally weak second quarter as well. But, the third and fourth quarters are expected to see increased travel owing to the festive season, although it will still be lower on-year.
Delayed resumption of international operations is likely to translate into a steep drop in passenger numbers for fiscal 2021. Crisil projects passenger numbers at 25-30 million, which was the level last seen in fiscal 2008.
20/07/20 MG Arun/Mail Today/dailyO
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