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COVID second wave impact: SpiceJet reduces passenger fleet capacity; IndiGo expands

COVID second wave impact: SpiceJet reduces passenger fleet capacity; IndiGo expands
May 04
12:56 2021
Representative Image

Representative Image

The Indian aviation sector once again bore the brunt of COVID after regional lockdowns following the resurgence of the virus in the country led to a decline in passenger traffic for the first time in April in 2021.

As a result, airlines have now turned to the government for a bailout. They have also demanded a reduction in the capacity cap from 80 percent currently to 60 percent and increase the lower fair limit.

Apart from reducing demand, the airlines are also hit by the rise in operational cost due to the fall in rupee. The rupee is currently hovering around Rs 74.07 per US dollar. It has directly harmed the airlines as a large part of airline expenses are in dollars. Besides, the Ministry of Civil Aviation has continued to cap the fares of domestic flights till May 31, 2021 which has further added to their woes.

SpiceJet reduces passenger fleet, expands in freight

In the current scenario, a strong trend of consolidation is shaping up in the industry with financially strong airlines making headway in the market. On the other hand, the players with limited capacities are being forced to curtail their operations or divert them.

A Credit Suisse report suggests that SpiceJet has reduced its passenger fleet capacity by 25 percent during the last year. However, it has yet not resulted in market share reduction due to the lower activity levels across the industry.

The airline has also run into trouble with lessors and at least two of the lessors have sent notice for grounding of 10 planes to SpiceJet. As per the report, SpiceJet has reduced its overall fleet by 13 planes to 103 planes by December 2020. With grounding notice for 10 planes, the fleet size is expected to reduce in the March quarter as well.

While SpiceJet is constantly decreasing its passenger fleet, it has grown its freighter fleet to 18 planes from just 1 plane in FY19. It is an indication of the company moving in direction of the current trend which requires more cargo facilities onboard for the supply of oxygen and other medical equipment. With 18 planes, freighters now contribute to 17.5 percent of SpiceJet’s fleet.

IndiGo boosts its presence

While SpiceJet has focused on growing its freight fleet, no such diversion has been observed with other airlines. GoAir has continued to maintain its passenger fleet while IndiGo has expanded during this time.

IndiGo has added 9 A321-NEO planes to its passenger fleet post-December 2020. Overall, IndiGo has added 45 NEO planes in the last year and gradually replaced 320 CEO planes.

The A320CEO disposal and 45 A320/321 NEO addition will make their fleet more efficient. It benefited the company during the recovery phase till March-end. It also stands to gain from the reduced fleet capacity in the industry.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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