High airfare drags air passenger traffic lower

High airfares as a result of capacity constraint dragged the domestic air passenger traffic lower by 4.2 per cent to 109.95 lakh in April 2019 on a year-on-year (Y-o-Y) basis, ratings agency ICRA said on Thursday.

A day ago, data furnished by the Directorate General of Civil Aviation (DGCA) showed that air passenger traffic declined to 1.09 crore in April from 1.15 crore reported for the corresponding month of the previous fiscal.

The development assumes significance as the last monthly Y-o-Y de-growth in the domestic passenger traffic was witnessed in June 2013.

As per a note by ICRA, the downtrend was primarily attributed to adverse impact on the industry capacity which has been hit hard due to grounding of aircraft by Jet Airways which ceased operations from April 18, 2019.

The consequent increase in airfares due to the demand-supply imbalance impacted the industry passenger load factors (PLFs).

"The discontinuation of operations by Jet Airways has impacted 14 per cent of the total industry capacity. Overall, the moderation in capacity starting February 2019 has resulted in increased airfares...," said Kinjal Shah, Vice President and Co-Head, Corporate Sector Ratings, ICRA.

"India being a high price sensitive market, it has affected the passenger traffic growth from October 2018 onwards. While there has been redeployment of some of the aircraft of Jet Airways by the other airlines and thus some moderation in the airfares between April 2019 and May 2019, overall they continue to be high," Shah added.

ICRA added that while the increased airfares are likely to support the profitability of the airlines in an environment of high costs, the impact on passenger growth does not bode well for the industry.