Why Jet Airways shutting down operations poses a challenge for Mumbai

Jet is the largest player in the Mumbai airport, with over 110 domestic slots and 30 international slots from the city

Air travellers in Mumbai International Airport could face serious capacity constraints and a colossal hike in airfares with the shutdown of all Jet Airways operations. 

The reason is straightforward. Jet is the largest player in the airport, with over 110 domestic slots and 30 international slots from the city. IndiGo has 97 domestic slots and 5 international slots from Mumbai, according to airlines sources. 

To plug this gap, the Directorate General of Civil Aviation (DGCA) has temporarily granted 50 slots of Jet to other airlines, including Vistara, AirAsia India, IndiGo, GoAir, SpiceJet, among others.  But that is around a third of the total slots with Jet, and a clear indication of the sizeable mismatch between demand and supply of seats from Mumbai — both in domestic as well as international routes. 

The aviation regulator is also planning to throw a wrench in the works: It is planning to direct airlines to augment their capacity and bring in new planes to fill the Mumbai slots given to them and not divert planes from other routes. 

A top executive at one of the airlines, which has received some slots, says: “The DGCA move is ridiculous. We will be ready to put in new capacity on these routes if they are willing to give these slots permanently rather than extend the same till the second week of July. You don’t expect me to lease new planes for only three months.”

He points out that while the DGCA intends to keep prices under check, such a move will see surge in airfares. Under the rules, any slot not utilised for more than a month should be reallocated permanently. The government is unwilling to do so, as it will reduce the valuation of Jet in front of potential buyers. 

Looking at the grounding from a pan-Indian perspective, Jet constitutes for over 18 per cent of the 660-strong airlines fleet capacity. 

With about 90 new additional planes expected to be added to the fleet in 2019-20, and with an annual passenger growth expected to be at around 14-16 per cent (according to CAPA estimates), the survival of Jet could be critical. 

For the time being, airlines estimate that in May itself there will be new capacity additions from IndiGo and SpiceJet. IndiGo has been taking an average seven to nine planes a month.