Despite slowdown, air traffic grows fastest in November this year at 11.2%

Despite economic slowdown, air travel for November surged 11 per cent, the first time passenger growth has seen a double-digit rise after the closure of Jet Airways. Industry executives described the spike a result of heavy promotional fare and spill over of the heavy forward sale done during the festival season on the back of lower fare.

In November, passenger growth witnessed 3.86 per cent growth (month-on-month) and 11.2 per cent (year-on-year). About 1.2 crore passengers flew in November as compared to 1.1 crore in October. Balu Ramachandran, senior vice-president of travel portal Cleartrip, said the growth was primarily driven by low fares, with the portal’s data showing that November is the first month in this year where there was a decrease in average domestic fare to the tune of 9 per cent.

“Our data indicates that after the collapse of Jet, all airlines tried to increase their yields. However, the drop in average fare in November helped airlines to increase occupancy and drive 11 per cent growth,” he said. 

While the industry opinion is divided over the sustainability of unprofitable growth, which is primarily led by low fare, some described it as the resilience of air travel against the economic slump.

 “Looks like air travel is an outlier. Demand was definitely stronger in November. Some of it was pent-up demand after the festive season. Two-wheeler companies couldn’t revive growth in spite of heavy promotional sales. However, there are takers for air tickets despite capacity glut and if tickets are being priced at optimum rate, said an executive head of a private commercial airline. 

However, some said that growth led by low fare should not be an ideal way to push demand. Anytime an airline operates a flight beyond 90 per cent occupancy, it is cannibalising profitability of its other flight, which is being sold at a little higher price.

Profitability is a hard balancing act. You don’t do it by selling cheap tickets and filling up planes, said a CEO of a low-cost carrier. 

A few days ago, SpiceJet Chief Executive Officer (CEO) Ajay Singh had warned that selling cheap tickets might take airlines to a similar financial collapse being witnessed by telecom companies.