Govt plans to lift cap on flights, wants airlines to fly full capacity

Except IndiGo, airlines resist lifting of cap as traffic uncertain

The government has initiated discussions with airlines to allow them to operate in full capacity, people aware of the development said. However, without a clarity on return of traffic, airlines are asking the government to delay such a move, implying that they will not be able to profitably deploy any more capacity.

Currently, airlines are allo­wed to deploy 80 per cent of their pre-Covid capacity. But except market leader IndiGo, no other airline has been able to reach even 70 per cent of the capacity of what they operated during the previous winter before Covid struck. 

Domestic flights resumed on May 25, 2020, after being closed for  almost two months due to the Covid-linked lockdown.

“The government intends to take back things to normalcy and that’s why it is seeking suggestions to remove the cap on capacity from the middle of January. A decision will be taken soon,” said a government official involved in decision making.

Airlines, except IndiGo, have said that any decision to further increase capacity should be deferred to March as forward-booking for the next three months is poor. 

IndiGo, currently with 265 aircraft in its fleet, is eager to expand and has repeatedly lobbied the government to remove any regulations on fare and capacity. With a ban on normal international travel, the airline needs to expand domestically or risk idling its planes while increasing the fixed cost. During  December, the airline has deployed around 78 per cent of what it operated before Covid.

“We are operating with too many restrictions. We should get back to an open and free world as quickly as possible,” the airline’s CEO Ronojoy Dutta had recently said in an interview.

However, rivals like SpiceJet, Go Air and AirAsia India have told the government that with capacity and fare cap removed, IndiGo’s expansion will increase their losses. One of the CEOs has even told the government that there can be cases of bankruptcy too, according to sources.

“Anyway, Q4 is a weak quarter for airlines as January-March remains a lean season after the high of the festival month in October and year end travel in December. It is severely worse this year as there’s hardly any forward bookings. It will be very difficult to profitably deploy any more capacity,” said head of commercial of an airline.

While civil aviation minister Hardeep Singh Puri has been optimistic about airlines regaining the pre-Covid capacity by end of December, bureaucrats believe the aviation sector may take longer to return to normalcy. Aviation secretary Pradeep Singh Kharola said, ‘’I don’t think the bad period is over. It will take another two-three months for things to get back to normal.”

Analysts tracking the sector said the biggest worry is the absence of business travellers who buy costly tickets making it possible for airlines to offer cheaper fares to vacationers.