Other airlines step in to fill up Jet-shaped hole in sky within 12 months

Given the unlikelihood of Jet Airways finding a bidder by the Friday deadline, passenger growth might take a hit for the next 12-24 months. But the situation will also reduce competition and accentuate the consolidation of an industry facing hyper-competition and growing losses.

According to CAPA, in 2019-20, domestic traffic is projected to grow at around 14-16 per cent, while international traffic will grow by 10-12 per cent.  All the airlines combined are projected to add over 90 planes to meet this growth.

Yet with the closure of services by Jet Airways (which had 115 aircraft), this projected traffic growth will slow down as the vacuum in capacity cannot be fully met, despite the ambitious noises made by competing airlines in the past few weeks about plans to lease out additional planes, some of which are grounded Jet planes.

According to industry estimates, other airlines are leasing, or are in the process of adding, another 70 additional planes, over and above their earlier plan to add 90 planes to fill in the capacity lost due to Jet.

Therefore, all the airlines put together will now add 160 additional aircraft for the financial year. That’s an average of more than 13 planes a month.  The extra planes and slots being offered to other airlines will be able to fill up 60 per cent of Jet’s capacity within a year.

Yet this massive addition will not be able to close the gap in plane capacity. For this, 205 planes are needed.

“It will take 12 months in the domestic skies and 24 months in the international skies to get back to the original high growth path of aviation. It happened when Kingfisher closed down and Air Deccan died. But the two years will give companies an opportunity for consolidation and reduce the intensity of competition leading to price undercutting which is not sustainable,” said a consultant who has worked with all the major carriers.

He pointed out that, with Jet gone and Air India also coming back on the block, consolidation will happen. The industry had estimated that consolidated losses for the airlines in FY20 would be to the tune of US $ 550-700 million — the bulk of this coming from full service carriers like Jet and Air India. CAPA has predicted they will lose over $800 million while low cost carriers will make money. 

Leading the new capacity race is SpiceJet, which is planning to lease 40 planes, many of which are Jet’s grounded planes. However, it has 13 grounded Boeing Max planes, so part of this capacity addition will replace these planes until SpiceJet is given clearance to fly the Max’s again.

A smaller player, Air Asia, has decided to double its plane induction for the financial year to 10. Go Air has postponed its earlier plan to replace about 11 Airbuses this year with newer aircraft. Four of these older planes are now being deployed to fly 28 additional flights every day, following permission from the Director General of Civil Aviation (DGCA) for additional slots in Mumbai and Delhi (which had been Jet’s) for the next three months.

Go Air executives say they have enough planes to handle an additional 50 more flights and want more slots.   

There are, of course, opportunities which will be opened up in the international market with Jet’s demise. The DGCA has already pointed out that it will offer Jet’s international slots, especially in the peak summer season. And according to earlier estimates (before the airlines decided to order additional capacity because of Jet’s collapse), a third of the additional planes were expected to be deployed internationally.

That is why Vistara, which got permission to fly international recently,  is looking at adding another 16 aircraft, including Jet’s grounded Boeing 777s,  in order to quickly enter the international medium and long haul routes.  

And IndiGo, which is expected to add around 40 planes this financial year, also says it is  looking at acquiring the long distance A321neo LR and A321 XLR.

In the international arena Jet used to lead in terms of traffic from India in the 5.1 million seats a year European market with attractive slots. Aviation experts say that both IndiGo and Vistara will leverage the opportunity and fill the vacuum created by Jet in these middle haul markets.

Moreover, with bilateral seats from India exhausted in lucrative markets like Dubai, Abu Dhabi, and Singapore — and the government not keen to open up — the Jet slots could give a big push to Vistara, IndiGo, and Go Air to expand their international business.