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Mint Explainer: Why Indian aviation expects a historic Q3
Summary
- Strong demand momentum for air travel coupled with onset of the festival season is expected to result in record levels of air traffic, two airline executives told Mint
New Delhi: Indian aviation has experienced a whirlwind of changes over the past decade, with several airlines shutting down, new ones being launched, Air India being privatised, IndiGo stacking up a cumulative orderbook of over 1,000 aircraft, and ongoing consolidation in the sector.
The effects of covid have worn off, and with Indians showing an increased propensity for air travel the sector has experienced rapid growth this year. Mint explains why insiders expect the current quarter to be historic.
Riding tailwinds
India’s air passenger traffic has more than doubled since 2013. Domestic air passenger traffic for April-September 2023 saw a 142% jump to 112.9 million passengers from 46.6 million during the same period in 2013.
Until 2022 the highest monthly air traffic in the history of Indian aviation was recorded in December 2019, with 13.02 million passengers. This record was broken in May 2023, when a record 13.2 million passengers were recorded.
The strong demand momentum compared to pre-covid levels is even visible in the weak travel periods of Jan-Mar and Jul-Sep. Data from Directorate General of Civil Aviation shows that in every month since January, air travel was higher than the corresponding pre-pandemic period by an average of nearly 8%.
Countering headwinds
In fact, domestic air traffic has also not been affected by the grounding of major airlines (such as Go First in May 2023 and Jet Airways in April 2019) despite a surge in air fares due to these incidents.
This year has also seen airfares nearly 30-40% dearer as compared to last year on account of capacity constraints following global supply-chain issues and high prices of aviation turbine fuel. Still, airlines have been able to maintain higher prices without affecting demand too much.
"The industry has witnessed improved pricing power, reflected in the improved yields and thus the revenue-per-available-seat-kilometre to cost-per-available-seat-kilometre (RASK-CASK) spread of the airlines," ratings agency ICRA said in a report.
Preparing for a boom
The strong demand momentum for air travel coupled with onset of the festival seasons in India is expected to result in record levels of air traffic and “very healthy" top lines and bottom lines for Indian airlines, two airline executives told Mint.
The government has set in motion various steps to handle the anticipated congestion at major airports ahead of the December quarter. The CISF will deploy additional manpower in two phases (by October and by November), the Bureau of Immigration will reinforce its staff from October, and airport operators have been asked to deploy additional X-ray machines, check-in counters, and self-check-in booths at airports. Airports have also been asked to use social media to provide real-time updates to passengers.
