Rise in domestic air travel demand to limit airline losses

As per the data release from DGCA, total passengers in August 2021 came in 6.7 million, up 137% YoY on a low base. PLF of all airlines improved sequentially during the month.

New Delhi: Air traffic in terms of passenger and passenger load factors (PLFs) has improved in line with seasonally stronger demand and reining-in of Covid cases across the country and this should help in limiting the airline losses, brokerage firm ICICI Securities said in a report on Monday.

"Government has increased the allowable flying capacity to 85% of the pre-Covid level in the domestic segment. With daily traffic at 250k levels, crude at US$75/bbl, no major supply cuts by any airline and a long road to recovery for the international segment, profits remain distant. However, higher flying capacity and seasonally strong Q3 should help limit losses," the report said.

The brokerage firm predicts that air traffic trends will gradually cross the 250k daily mark and said that weekly average daily fliers came in at 243k in the week ended (W.E) 18 September 2021 vs 222k in W.E. 11 September 2021, the average number of departures rose to 2,039 vis-a-vis 1,982 in the prior week. The number of fliers per departure increased to 114 vs 111 in the prior week, said the report.

As per the data release from DGCA, total passengers in August 2021 came in 6.7 million, up 137% YoY on a low base. PLF of all airlines improved sequentially during the month. IndiGo saw the largest improvement in PLF (from 66% in July 2021 to 74% in August 2021) followed by AirAsia (from 54% in July 2021 to 60% in August 2021). Amongst all airlines, SpiceJet reported the highest PLF (80%) in August 2021.

Passenger load factor is a measure of how much of an airline's passenger carrying capacity has been utilized.

On Saturday, the Ministry of Civil Aviation raised the limit on airline capacity from 72.5% to 85% of pre-Covid levels. It has also reduced the number of days beyond which an airline can set its own prices to 15 days (from earlier 30) from the date of booking. Thus, airlines will now have to issue tickets within the regulated bands only in the current window of the next 15 days.

The Ministry of Civil Aviation has capped the domestic airfares since May 2020 when flight operations resumed after a gap of two months due to the outbreak of coronavirus pandemic. The price capping was put on airlines to keep ticket prices in check due to the limited number of flights.