Airlines face difficulty in operating at full capacity amid low demand

Even as the government lifted the cap on capacity deployment, most airlines are finding it difficult to operate at full capacity due to less demand, according to a report in Mint. 

The aviation sector in India has faced several hurdles since 2020. First, the pandemic-induced lockdowns forced planes to be grounded for two months. Then, the slump in demand for travel surfaced. Cap on capacity deployment and high aviation turbine fuel prices following the Russia-Ukraine war followed.  

From May 2020 to October 2021, Centre placed a cap on capacity deployment by airlines. This was in the range of 33 per cent to 85 per cent. With the excess capacity that could not be deployed, the airlines found it increasingly difficult to generate enough revenue.

IndiGo, the largest airline in India, reported losses for 9 out of the last 10 quarters, the Mint report added. 

In October 2021, the cap was removed and airlines were allowed to operate at full capacity. It brought forth a new problem, less demand. The travel sentiment was impacted by several waves of the Covid-19 pandemic. People postponed travel plans to protect their savings. In this, high travel fares impacted the demand negatively.

"Since last year, there has been an unprecedented rise in jet fuel prices, which was further aggravated by the Russia-Ukraine war, which in turn has also pushed fares, impacting leisure travel demand to an extent. Hence, the combination of these factors has impacted the capacity deployment levels for the sector," Suprio Banerjee, vice-president and sector head, corporate ratings, Icra was quoted in the Mint report as saying. 

Now, even when they are allowed to run at 100 per cent capacity, airlines are not flying all of their aircraft. IndiGo is operating at 88 per cent capacity. 

AirAsia is operating at 63 per cent capacity. SpiceJet is operating at 37 per cent capacity as against the allowed 50 per cent. 

The passenger traffic is expected to reach the pre-pandemic level only by FY24.