Continued recovery in domestic passenger traffic as Covid-19 infection trajectory drops: ICRA

In ICRA’s view, the price increase may not materially impact the passenger traffic demand as in the current scenario, travel is limited to only necessary travel while both leisure and business travel have been curtailed due to various state-wide restrictions and the spread of the infections. However, it will allow airlines to recoup some part of the increase in ATF prices, thereby cushioning some impact on the airlines’ losses.

New Delhi:The domestic passenger traffic has continued to register improvement and the same grew by approximately 30-31% at around 65-66 lakh in August 2021, compared to approximately 50.1 lakh in July 2021, signifying a Y-o-Y growth of about 131%. The airlines’ capacity deployment for August 2021 was around 99% higher at around 57,500 departures, as against 28,834 departures in August 2020. On a sequential basis, the number of departures in August 2021 was higher by about 22%, as Covid-19 infections demonstrated a downward trajectory.

Commenting on the development, Kinjal Shah, Vice President & Co-Group Head – Corporate Ratings, ICRA said, “For August 2021, the average daily departures were at ~1,900, significantly higher than the average daily departures of ~900 in August 2020, and higher than ~1,500 in July 2021, though it remains lower than ~2,000 in April 2021. The average number of passengers per flight during August 2021 was 114, against an average of 106 passengers per flight in July 2021. Though the recovery continued in August 2021, there is continued stress on demand, driven largely by the second wave of the pandemic, limiting travel to only necessary travel, while both leisure and business travel have been curtailed due to various state-wide restrictions, despite the decline in infections.”

The Ministry of Civil Aviation (MoCA) permitted increasing the capacity deployment on domestic routes, gradually from 33%, with effect from May 25, 2020, to 80%, with effect from December 03, 2020. However, it reduced the permissible capacity deployment to 50% of pre-Covid levels, with effect from June 01, 2021 due to the resurgence of the second wave of the pandemic. It had again increased the permitted capacity to 65% with effect from July 5, 2021. It has now permitted increasing the capacity to 72.5% with effect from August 12, 2021 until further orders. In addition, the MoCA also increased the minimum and maximum fare band by 10-13% for domestic flights with effect from August 12, 2021 until August 31, 2021.

In ICRA’s view, the price increase may not materially impact the passenger traffic demand as in the current scenario, travel is limited to only necessary travel while both leisure and business travel have been curtailed due to various state-wide restrictions and the spread of the infections. However, it will allow airlines to recoup some part of the increase in ATF prices, thereby cushioning some impact on the airlines’ losses.

While the scheduled international operations have been suspended further till September 30, 2021, under the Vande Bharat Mission (VBM) for evacuation of Indian citizens from foreign countries, which started from May 07, 2020, the international passenger traffic (inbound and outbound) for Indian carriers has been ~42 lakh for the period May 07, 2020 to August 31, 2021. For August 2021, the international passenger traffic for Indian carriers under the VBM was estimated at ~3.1 lakh, a sequential growth of ~47%.

As for the ATF prices, until February 2021, they were lower on a Y-o-Y basis while in March 2021, April 2021, May 2021, June 2021, July 2021, and August 2021 prices were higher by 3.0%, 59.8%, 103.4%, 86.3%, 59.7%, 55.3%, respectively, on a Y-o-Y basis. In September 2021, the prices have been higher by 54.6% on a Y-o-Y basis, attributed to the low base of September 2020, when the prices declined Y-o-Y by 32.2% due to the impact of the pandemic.