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Volume IconIndia's aviation sector on the verge of a turnaround?

Indian airlines' passenger traffic is rising steadily. And, in time for the festival season, airlines in India are allowed to operate at 100% capacity. What else is in favour of the sector?

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If the recent indicators are anything to go by, India’s aviation sector is seeing a solid revival after pandemic-related turbulence. On October 9, domestic airlines flew more than 300,000 passengers for the first time since February. While this is still a shade shy of the pre-covid level of 350,000 daily fliers, things are certainly looking up for the sector. 

Major airports saw heavy crowds and long queues last weekend, indicating the comeback of air travel.  

The country’s two biggest airports, Delhi and Mumbai, are reopening terminals that had been closed earlier due to low footfalls. 

In what comes as a shot in the arm ahead of the peak holiday season, the government has allowed airlines to operate at 100% capacity from October 18. At present, this limit is 85%. 

Data from aviation regulator DGCA show that the average load factor of major airlines was 70% in August. The country’s biggest airline, IndiGo, said its current load factor was at 75-80%. It is operating 1,200 flights daily, which is around 80% of its pre-Covid-19 capacity.

India is also re-opening its borders for tourists after 18 months. The government will start issuing fresh tourist visas from October 15 to foreigners who are coming in through chartered flights. Those who want to visit India on regular commercial flights will be able to do so from November 15. Rules pertaining to their testing, quarantine and vaccination are yet to be laid out. To help the tourism industry, the government is giving out visas to the first 500,000 tourists free of cost. The scheme will be applicable till March next year.  

In 2019, India had seen nearly 11 million international tourist arrivals which translated into $30 billion of foreign exchange. 

With the sale of Air India to the Tata group concluding by the end of this year and Jet Airways resuming operations soon after, the new year promises to be full of new beginnings for Indian aviation. 

Also, Akasa Air, the new airline backed by billionaire Rakesh Jhunjhunwala which received a no-objection certificate from the government on October 11, expects to start flying next year. 

Akasa Air still requires a clearance from the DGCA, besides other permissions. Jhunjhunwala has joined hands with former IndiGo President Aditya Ghosh and Jet Airways CEO Vinay Dube to launch this low-cost carrier.

As aviation demand inches towards the pre-pandemic level, the time may be ripe for Akasa Air to start operations. 

One major headwind that might work against the industry, meanwhile, is the high price of aviation turbine fuel. Fuel now accounts for 40% of the cost of running an airline in India. 

In Chennai, state-run fuel retailers have increased ATF prices by 9% in the past month and 83% in the past year to about Rs 74,500 per kilolitre. The increase comes amid a rise in global crude oil prices reflecting an improving demand.

Further, the government’s refusal to do away with fare caps that have been in place since May last year will also impact the aviation market’s recovery. The floor prices were imposed by the government to protect financially weaker airlines during the pandemic, while upper limits ensured that customers were not overcharged. Now that demand is back, airlines have been asking for restrictions on fares to be lifted. In a minor relief, the government last month allowed airlines to set their own fare for travel beyond 15 days from the date of booking, instead of the earlier 30. This is expected to increase competition among the airlines during the holiday season.  

If the current trend sustains and there is no sudden surge in Covid-19 infections, the Indian civil aviation sector may be on the verge of a turnaround. 

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First Published: Oct 14 2021 | 11:19 AM IST

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