Indian aviation has been so frequently impacted by one or the other event that it is difficult to map the current capacity against something which is stable (Representational image)
Aviation, like a few other sectors, is set for a fabulous third quarter. On October 9, the domestic air traffic crossed the four lakh per day mark — the third time since the restart of flights post-Covid lockdown. Domestic passenger traffic stood at 95 percent of the pre-Covid average while the flights deployed were 87 percent of the pre-Covid average, but just 75 percent of the approved schedule.
As both airlines and airports gear up to handle additional loads, there is one challenge – capacity. Industry-wide capacity in domestic aviation is currently lower than what it was pre-Covid. A lack of capacity will restrict the growth needed to achieve new highs.
The numbers to beat
December 2019 saw the highest domestic traffic in India thus far. At 1.30 crore, it showed that there was growth even after the slump of capacity due to Jet Airways going down in April that year. The sector saw 1.23 crore passengers take flight in February 2020, a month before the lockdown. While the numbers were lower than December 2019, on a per-day average basis they trumped that of December 2019.
On average, February 2020 saw 425,179 passengers per day — a number that has not been crossed ever since the restart of civil aviation. In fact, there have only been two occasions when the domestic traffic per day crossed the 4 lakh mark, with the highest recorded on April 17 when 407,975 passengers took to the air. About 2,838 domestic flights operated on that day.
Compare that to the average of the first week of October and one realises that we are 125 flights per day away from this number.
Capacity constraints – how and why?
Indian aviation has been so frequently impacted by one or the other event that it is difficult to map the current capacity against something which is stable. 2019 saw Jet Airways go down and it took a while before capacity reached pre-Jet Airways levels. In terms of fleet, IndiGo — the country’s largest carrier — ended June 2022 with a fleet of 281 aircraft, which is 19 planes more than it had at the end of March 2020. However, media reports have indicated that IndiGo and GoFirst have their aircraft grounded due to a shortage of engines. This has neither to do with the cash position of the airlines nor with any issues with the engines like in the past. This is due to the supply chain issues affecting global suppliers during the COVID-19 pandemic. While the reasons could be looked at later, the impact is that not all planes will be available for the peak season.
Air India, now a Tata enterprise, saw some of its fleet being given to the Defence Research and Development Organisation (DRDO) for defence purposes. In addition to this, the Tata Group is working towards getting more and more aircraft operational. SpiceJet, on the other hand, has been barred from flying at more than 50 percent capacity by the regulator. The airline has seen its fleet strength go down and hasn’t inducted additional B737 MAX aircraft yet.
Comparing August capacity and passenger numbers to February 2020 — the last full month of operations before the pandemic and also the highest traffic month, shows that capacity by Available Seat Kilometres (ASK) was down 11 percent, departures were down 7 percent and traffic was down 18 percent. The registered fleet stood at 669 aircraft in September as compared to 691 this January, shows data released by the Directorate General of Civil Aviation (DGCA).
Impact on fares and finances
IndiGo reported its best-ever revenue for the April to June quarter this year. The increase in costs and foreign exchange losses meant that the airline couldn’t break even, even with such a splendid performance. As capacity gets constrained, airlines have the potential to increase fares. However, airlines have also entered a selective price war after the fare caps were disbanded. While this has stimulated demand, will it show up with the total revenue and yields being pushed up?
The last two financial years have seen IndiGo losing Rs 12,000 crore while SpiceJet has lost Rs 2,700 crore. In an industry where profits have been as thin as the boarding pass, recovering such a huge loss is a monumental challenge and the lack of capacity will end up keeping passengers away from flights which, in turn, will be a loss of potential revenue.
