 "Airlines sceptic about recovery in winter, play safe on number of flights")
Most Indian airlines don’t expect to utilise 60 per cent capacity in the next three months, show initial filings for the winter schedule.
While the Centre has allowed carriers to operate at 60 per cent of original capacity in the domestic sector, airlines — except for IndiGo and Vistara — are not confident of deploying even 50 per cent of that.
Starting from October 25 and running up to March 31, the winter schedule comprises the remaining part of Q3 and the entire Q4 of FY21.
This is in sharp contrast to China where domestic flights in September crossed last year’s levels, official data showed, indicating the country’s aviation sector has attained full recovery.
SpiceJet and GoAir expect to operate 1,957 and 1,203 flights per week, which is 46.5 per cent and 48.3 per cent of the pre-Covid capacity of last summer.
Similarly, AirAsia India expects to operate only 885 flights, just 48 per cent of its pre-Covid capacity.
Industry executives said weaker financial condition of these airlines have forced them to expand slowly and operate only on profitable routes to prevent further bleeding.
Executives of these airlines said they are cautious as airfares continue to be under pressure. So, deploying more capacity will lead to increase in losses.
However, they said that going ahead, if there is a sign of recovery, they will promptly expand.
“This is just the first cut. We expect to add more flights gradually as we don’t intend to dump flights just for the sake of market share,” said an executive of Go Air.
“Our numbers will improve further. We are in the process of filing for more flights, but we will be very cautious with where we deploy flights as we don’t intend to add to the losses,” said a SpiceJet executive.
Capacity expansion of SpiceJet is stalled as Boeing 737 Max aircraft – of which it has 205 aircraft on order – is still grounded. SpiceJet has also returned around 12 aircraft to lessors as it focuses on cost control.
A cap on airfare – under which airlines have a threshold of maximum and minimum fare – has somewhat insulated the weaker airlines from a price war and further bleeding. Fare caps are in place till November 24. Airlines have a mandate to sell 40 per cent of the seats at median fares.
With a stretched financial condition, state-owned Air India has filed for 1,126 flights, which is lesser than Go Air and 53 per cent lesser than its original schedule.
“The focus will be on the international sector and not domestic as international routes are more profitable,” said an Air India executive.
He further pointed out that many of the smaller airports are not prepared to handle 60 per cent capacity. Air India, which is likely to double losses to around Rs 5,300 crore in FY21 is in dire need of cash infusion.
Tata group’s full service airline Vistara, which is almost nearing 60 per cent capacity, will operate more flights to Goa from Delhi and Mumbai from Sunday. “We expect air travel to pick up further, especially during the festive season,” said chief commercial officer of Vistara Vinod Kannan.
Analysts said a cautious approach by rivals will help market leader IndiGo consolidate its position and increase market share.
The airline, which sits on a cash balance of around Rs 20,500 crore, has been lobbying the government to remove cap on capacity and airfare as it intends to expand and attain its pre-Covid capacity quickly.
“We hope to increase our domestic capacity to 60 per cent by Diwali, 80 per cent by Christmas and 100 per cent by Holi as per our approved summer schedule for 2020,” IndiGo CEO Ronojoy Dutta had said recently at a media interview.
“Unlike developed markets like the US and Europe, Indian carriers have not received any material relief/liquidity support from the government. This has strengthened IndiGo’s competitive position given its strong B/S and liquidity,” Ashish Shah and Vaibhav Shah of Centrum Broking wrote in a recent report.
