The aviation sector has been hit hard this year. The air passengers are suffering from high fares and lower availability of seats due to the grounding of planes in the past three months. According to some estimates, the number of aircraft with scheduled commercial airlines is down by about 180 as compared to last December when there were about 638 aircraft flying in the Indian skies.
Jet Airways, which was operating about 130 aircraft, has seen its operations coming to a halt. Some of its aircraft are now flown by rival airlines like SpiceJet, but the capacity vacuum is big enough to be filled soon. In addition, some 17 planes of Air India are grounded on account of maintenance and funding crunch. The national carrier hasn't been able to receive funds from the government, and is entirely dependent on the money generated from its operations. It's expected that AI will have these aircraft flying by August.
Earlier, 18 Boeing 737 Max 8s were grounded in the country by the aviation regulator DGCA after back-to-back fatal accidents of the same-type aircraft in Ethiopia and Indonesia. This decision affected the operations of Gurgaon-based SpiceJet. DGCA figures point out that the domestic passenger growth in the first three months of 2019 has fallen significantly to a single-digit number. In March, the annual growth stood at 4.92 per cent, the lowest in over four years. "The lower capacity has led to a hike in fares by almost 25 per cent on an average, and in some cases, the fares have nearly doubled," says Mark Martin, CEO and founder of Dubai-based Martin Consulting.
A report by ratings agency ICRA says that the decline in passenger traffic has followed the increase in airfares due to lower number of flights. "The overall aircraft traffic witnessed marginal de-growth of 0.1 per cent in March, led by decline of 1 per cent in international aircraft, while domestic aircraft movement remained stagnant," says the report.
The situation is going to get worse in the holiday season. Ratings agency India Ratings says that "the airlines are grounding flights due to multitude of reasons - financial trouble, shortage of pilots and technical issues in flights. While this could aid airports during ongoing expansions in managing loads, the passenger growth could dampen during the season of travel (April and May)."
ICRA expects the turbulence in the aviation sector to affect the airports operators as well. "The robust growth trend of last few years, wherein the CAGR (compounded annual growth rate) had been 17.5 per cent has been arrested. This can impact revenues and margins for the airports sector at a time when many of them are undertaking sizeable capex."
The strong headwinds in the aviation sector have thus far impacted the large metro cities whereas smaller metros have still maintained growth momentum. For instance, the airport-wise passenger traffic in Delhi has declined by 9.4 per cent, 16.2 per cent in Mumbai, and 7.4 per cent in Chennai in March. Bengaluru, Hyderabad, Ahmedabad, Guwahati, and Goa have continued their growth.
This is just a blip and the passenger growth is likely to pick up in the months ahead as the overall passenger sentiments remain intact, says expert. "There are no signs of passenger growth slowing down in the long-term. The capacity imbalance created over the past three months will be resolved as airlines add capacity at a robust pace," says an aviation consultant.
Unless it gets acquired in the pending bidding process, Jet Airways' fall is going to have a long-lasting effect on the sector, and the sufferers are likely to be almost everyone.