Tuesday, October 19, 2021

Domestic passenger traffic accelerated: ICRA

by Staff Correspondent

IADB: The domestic passenger traffic accelerated in September 2021 with a sequential growth of 2-3% as Covid-19 infection trajectory dips, claimed credit rating agency ICRA. The agency further stated the fact that, September 2021 witnessed a 2-3% sequential growth and 74% Year over Year growth in domestic passenger traffic as infections declined. However, elevated aviation turbine fuel (ATF) prices continue to pose a near term challenge; sequential increase of 9.0% witnessed in October 2021.

The domestic air passenger traffic grew by 2-3% at around 68-69 lakh in September 2021, compared to 67 lakh in August 2021. The airlines’ capacity deployment for September 2021 was around 54% higher than September 2020 (~61,100 departures in September 2021, against 39,628 departures in September 2020). On a sequential basis, the number of departures in September 2021 was higher by 6%, as Covid-19 infections demonstrated a downward trajectory.

Mr. Suprio Banerjee, Vice President & Sector Head, ICRA informed that, “For September 2021, the average daily departures were at 2,100, significantly higher than the average daily departures of 1,321 in September 2020, and higher than 1,900 in August 2021, though they remained lower than 2,200 in Jan 2021.”

Adding further to his claim he stated that, “The average number of passengers per flight during September 2021 was 113, against an average of 117 passengers per flight in August 2021. Though the recovery continued in September 2021, demand continues to be subdued from the corporate traveller segment as reflected by passenger traffic being lower by 38% in September 2021 compared to pre-Covid levels.”

The Ministry of Civil Aviation (MoCA), 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 increased the permitted capacity to 72.5% with effect from August 12, 2021, but has now permitted increasing the capacity to 85.0% with effect from September 18, 2021 until further orders.

Additionally, effective September 18, 2021, the Ministry relaxed the fare cap rule wherein the fare caps in each of the bands shall be applicable up to next only 15 days on a rolling basis. Hence, the minimum and maximum fare chargeable shall continue to be rolled over for the next 15 days cycle compared to 30 days earlier. In ICRA’s view, the increase in permitted capacity to 85.0% levels is a step in the right direction, given the onset of the festive season. Also, reduction in fare cap roll over period from 30 days to 15 days is a move towards market driven pricing as applicable during the pre-Covid period, wherein the pricing was determined by the actual demand-supply dynamics and real passenger load factors.

While the scheduled international operations have been suspended further till October 31, 2021, under the Vande Bharat Mission (VBM) for evacuation of Indian citizens from foreign countries, which started from May 07, 2020, international passenger traffic (inbound and outbound) for Indian carriers stood at ~46 lakh for the period May 07, 2020 to September 30, 2021. For September 2021, international passenger traffic for Indian carriers under the VBM was estimated at ~4.0 lakh, a sequential growth of ~30%.

As for the aviation turbine fuel (ATF) prices, there has been a sharp increase of 78.6% on a Year over Year basis till October 2021, attributed to increase in crude oil prices This coupled with low capacity utilization of aircraft fleet will continue to weigh on financial performance of Indian carriers in FY2022. Furthermore, the credit profile of most Indian carriers continues to be characterized by a weak liquidity position.

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