Domestic passenger traffic growth subdued in 4M FY20: ICRA

The domestic passenger traffic growth during first four months of the current fiscal year (April to July) witnessed year-on-year growth of a mere 1.6 per cent primarily due to end of the tourist season, according to investment information firm ICRA.

"The growth in industry capacity measured in available seat kilometres (ASKMs) continued to be muted in July at 3.5 per cent," said Kinjal Shah, Vice President and Co-Head of Corporate Sector Ratings at ICRA.

"This was primarily due to the eventual discontinuation of the operations of Jet Airways with effect from April 18. Furthermore, domestic airlines have been increasing focus on international operations as witnessed in increasing capacity deployment, due to higher opportunities on international routes from India."

 

This is evident from increasing capacity deployment by some of the carriers on international routes, said Shah. But airlines continue to underperform the industry on international routes with passenger traffic de-growth of 14.7 per cent in July as against 0.6 per cent for the industry.

The market share of the Indian carriers on international routes declined by 528 basis points year-on-year to 32.1 per cent in July on account of the under-performance.

The aviation turbine fuel (ATF) prices had declined sequentially by 0.3 per cent and 5.5 per cent in June 2019 and July respectively. However, ATF prices increased sequentially by 3.3 per cent and declined year-on-year by 7.9 per cent in August while September again witnessed a sequential as well as year-on-year decline of 0.9 per cent and 9.1 per cent respectively.

The decline, however, may not have a material impact on the profitability of the airlines if they continue to witness pressure on passenger load factors (PLFs) which have been declining sequentially since May.

"Given the favourable international scenario, few more airlines are likely to enter into international flying from India or expand capacities on international routes in the near future to tap the opportunity," said Shah.

The domestic space, however, will continue to remain critical for the carriers as it provides sizeable potential as well as feed-in traffic for the international routes.

"As the airlines continue to expand their fleet, resulting in a gradual correction in the demand-supply imbalance and thus a further moderation in airfares, the domestic passenger traffic growth is expected to increase in the near to medium term," she said.

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