Air fares crash due to coronavirus; IndiGo, Air India, SpiceJet, Vistara feel the pinch

Air fares crash due to coronavirus; IndiGo, Air India, SpiceJet, Vistara feel the pinch

Indian Domestic airlines might soon start suspending flights on domestic routes as air travel demand suffers due to coronavirus outbreak

Domestic Airlines hit due to coronavirus Domestic Airlines hit due to coronavirus

Delhi to Mumbai flight for less than Rs 2,500! Bengaluru to Kolkata flights for just Rs 3,600! The novel coronavirus has stung the domestic aviation sector hard. Large-scale flight cancellations and poor demand are reflecting on the airfares of airlines across the board. So far, the domestic carriers have suspended flights on some international routes, domestic flight schedule still remains intact. But that's going to change if the demand stays lull for a longer period, and cases of novel coronavirus (COVID-19) increase in India.

"For the first three weeks of February, the domestic traffic growth was almost similar to January but the demand tanked by 2-4 per cent in the last week of February. March is expected to witness substantial drop in air travel demand with forward bookings (for flying schedules over the next two months) are down by about 20 per cent," says an aviation analyst. In January, the domestic air traffic growth stood at mere 2.2 per cent, and the demand in February and March is likely to show negative growth compared to last year.

In fact, the PLF (passenger load factors) or occupancy rates for all airlines except Vistara shrunk in January. The drop was more pronounced for carriers such as AirAsia India and IndiGo.

Analysts predict that airlines such as IndiGo, SpiceJet and Air India are closely monitoring the development on the coronavirus front, and will soon take a call on truncating their domestic flight schedule. "In metro routes like Delhi to Mumbai, IndiGo could curtail its frequency from about 16 now to 12-13 owing to weak demand. Though reducing frequencies in non-metro routes could create hassle for passengers," says the analyst. Let's understand with an example. Suppose if IndiGo is flying between Delhi and Mumbai in every 1.5 hours, it's easy for the airline to adjust passengers from one flight to the next flight. But that's not possible in, let's say, an Amritsar to Mumbai flight whose daily frequency is just three. "They cannot simply push a morning flight passenger to an afternoon flight. It could hurt the airline's perception and create dissatisfaction," says the analyst.

The March 15-April 15 is a lean period for the travel and tourism sector. Both leisure and business travels are generally weak just before the summer holiday season. The airfares are typically low during this period, and COVID-19 scare has pummelled the demand further. "For the domestic aviation industry, the 0-15 day booking period is a high yield period but that's not the case anymore. The average selling price during this period is well below the costs of the airlines," says an aviation expert.

Desperate to sell seats, the large airlines have been coming out with flash sales. Take AirAsia India, for instance, which announced its Big Sale on Monday. Its flash sales give passengers option to book tickets at Rs 999 for 16 destinations (Mumbai, Chennai, Kolkata, Hyderabad, Goa, Pune, Ahmedabad, and others) by March 15 to travel till July 1, 2021.

The COVID-19, which has affected over 120 countries so far, started affecting the domestic aviation sector from January-end when carriers announced suspension of flights to countries such as China, Vietnam and Hong Kong. By early March, the list of discontinued international services expanded further to cover at least 15 destinations.

On the international side, the national carrier Air India seems to be the worst hit since it commands the largest market share - 50.64 per cent (in Q2 FY19) - among domestic carriers. Air India has thus far suspended its services to China besides bringing down the frequencies to destinations such as Milan, Rome, Jeddah, Singapore, Japan, and others. In 2018/19, 63 per cent of Air India's passenger revenues (Rs 20,419.4 crore) were derived from international operations. As per the industry body IATA (International Air Transport Association), the financial impact of novel coronavirus (COVID-19) could be anywhere between $63 billion and $113 billion in 2020.

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