Domestic air passenger traffic may fall by up to 50% till at least June; seat factor likely to dip up to 60% over next 3 months: Report

Mumbai: The domestic air passenger traffic may de-grow as much as 50 percent up to at least June amid the coronavirus outbreak, according to a report.

With global travel bans due to the pandemic, many airlines across the world are staring at massive losses and fear going bust.

India has put a blanket ban on the entry of foreign nationals to its territory and, on 12 March, suspended visas of all foreign nationals till 15 April. Earlier, such a measure was limited only to the nations most affected by coronavirus.

 Domestic air passenger traffic may fall by up to 50% till at least June; seat factor likely to dip up to 60% over next 3 months: Report

Representational image. Reuters

"The spillover effect of the COVID-19 crisis on the domestic aviation sector is likely to be very significant over the March-May period.

"We expect a significant negative growth in monthly domestic traffic which can go as high as 50 percent at least up to June, depending on the severity of the outbreak in India in the near term," rating agency Acuite Ratings and Research said in the report on Monday.

The number of coronavirus cases in India has risen to 114 with one new case each in Ladakh, Odisha, Jammu and Kashmir, and Kerala, health ministry officials said on Monday. The Central and state governments have already initiated measures to stem the expected spread.

According to Acuite, domestic traffic during the March-May period has, historically, grown in the 16-23 percent range, except last year when Jet Airways ceased operations around the same period.

With the fall in passenger volume, the seat factor of the airline could see a sharp 50-60 percent decline over the next three months, it said.

Load or seat factor is a measure of how much of an airline's passenger carrying capacity is used or average percentage of seats filled in an aircraft.

As per the latest data from the Directorate General of Civil Aviation, domestic passenger traffic grew 2.2 percent in January with five major local carriers averaging around 86.16 percent load factor in January.

The seat factor for almost all the airlines had been high with an average over 85 percent during the March-May period of last year.

There has already been a drastic impact on the global aviation industry since the outbreak in China in January this year. Thousands of flights have already been cancelled by international airlines during February-March.

More cancellations are on the way over the next 1-2 months, given the travel restrictions and quarantine requirements that are being put in place by an increasing number of nations, Acuite Rating said in the report.

With the rapid spread of coronavirus across Europe, the US has put an embargo on incoming passengers from Europe and more nations are likely to follow suit.

Aviation think-tank Centre for Asia Pacific Aviation (CAPA) has already warned that most airlines across the world will go bankrupt if the governments do not take a coordinated action.

Noting that the average peak season fares have consistently declined over the past few years with the exception of last year, the report said that normally, start of a travel season encourages airlines to raise fares. "Clearly, this year is different with airfares set to decline substantially over the next 2-3 months, given the rapidly rising levels of cancellations in all segment of travel," it added.

The risk of a sharp fall in fares is borne out by the fact that flight tickets on the trunk route between Delhi and Mumbai during March 22-March 28 stand at around Rs 3,700, down from an average of Rs 4,200 during the previous months.

A similar trend can be seen over the other key routes of Bengaluru-Delhi and Bengaluru-Mumbai where fares have dropped over the past two weeks, Acuite Rating said in the report.

It added that the reduction in fares along with the sharply lower passenger load factors will result in lower operating margins of the airlines in the fourth quarter of 2019-20 and the first quarter of 2020-21. The airlines that have higher presence in international markets will clearly witness a sharper impact, it added.

Updated Date: Mar 16, 2020 19:41:58 IST



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