Continued recovery in domestic passenger traffic visible in Aug'21 with a growth of 30-31% : ICRA

Continued recovery in domestic passenger traffic visible in Aug'21 with a growth of 30-31% : ICRA

Domestic passenger traffic has continued to improve, increasing by 30-31% to roughly 65-66 lakh in August 2021, up from 50.1 lakh in July 2021, representing a 131% year-on-year increase. August 2021 capacity deployment by airlines was approximately 99% higher, with 57,500 departures, compared to 28,834 departures in August 2020. On a sequential basis, the number of departures in August 2021 was 22% higher, while Covid-19 infections continued to decline.

Ms. Kinjal Shah, Vice President & Co-Group Head – Corporate Ratings, ICRA, added, "In August 2021, the average daily departures were 1,900, significantly higher than the average daily departures of 900 in August 2020 and higher than the average daily departures of 1,500 in July 2021, though it remains lower than 2,000 in April 2021." August 2021 had an average of 114 passengers per trip, up from 106 passengers per aircraft in July 2021. Though the recovery continued in August 2021, demand remains constrained, largely due to the second wave of the pandemic, restricting travel to only necessary destinations, while leisure and business travel have been curtailed as a result of various state-level restrictions, despite the decline in infections.”

The Ministry of Civil Aviation (MoCA) approved gradually increasing capacity deployment on domestic routes from 33% on May 25, 2020, to 80% on December 03, 2020. However, it lowered the allowable capacity deployment to 50% of pre-Covid levels beginning June 1, 2021 in response to the recurrence of the pandemic's second wave. It increased the permissible capacity to 65% again on July 5, 2021. It has now authorised an increase to 72.5% of capacity with effect from August 12, 2021, pending future directives. Additionally, the MoCA increased the minimum and maximum fare bands for domestic flights by 10-13% between August 12, 2021 and August 31, 2021. According to ICRA, the price increase is unlikely to have a material effect on passenger traffic demand because, in the current environment, travel is restricted to necessary travel, while leisure and business travel have been restricted due to various state-wide restrictions and the spread of the infections. However, it will enable airlines to reclaim a portion of the increase in ATF prices, mitigating some of the impact on their losses.

While scheduled international operations have been suspended until September 30, 2021, the international passenger traffic (inbound and outbound) for Indian carriers has been 42 lakh for the period May 07, 2020 to August 31, 2021, as part of the Vande Bharat Mission (VBM) for evacuation of Indian citizens from foreign countries, which began on May 07, 2020. International passenger traffic for Indian carriers covered by the VBM was predicted at 3.1 lakh in August 2021, a sequential increase of 47%.

Prices of ATF were lower on a year-over-year basis until February 2021, but increased by 3%, 59.8%, 103.4%, 86.3%, 59.7%, and 55.3%, respectively, in March 2021, April 2021, May 2021, June 2021, July 2021, and August 2021. In September 2021, prices were 54.6% higher Y-o-Y, owing to the low base of September 2020, when prices fell 32.2% Y-o-Y due to the pandemic's impact.