Indian domestic air passenger traffic goes from bad to worse

October 21, 2008 Comments Off on Indian domestic air passenger traffic goes from bad to worse 200 Views

The bad news just does not stop for the domestic Indian civil aviation industry.

Recently released figures show an alarming drop to only 8.6 million domestic passengers for the third quarter of (July-September) 2008, with a miserable 2.68 million passengers for September 2008. This represents a 17% reduction over the same period last year, a 19% reduction from the previous month, and whopping 25% drop from the preceding quarter. Compare this with 33% annual growth in the previous three years.

Most industry experts attribute this drop due to the 25-30% reduction in capacity by airlines, and the 10-15% increase in fares.


Jet group (Jet Airways and JetLite) are still the dominant force in the industry, and with their new found ally the Kingfisher group (Kingfisher and Deccan) control almost 60% of the market.

Despite the deep cuts, flight load factors continue to drop. Experts feel there is an excess capacity of 20% or about 300 flights, which need to be cut, before the demand-supply balance is reached. This is evidenced by the sharp capacity rationalisation undertaken by Kingfisher Red (formerly Simplifly Deccan), which helped the airline raise its load factors from a miserable 39% in August to a more respectable 51.7% in September.


While all airlines have been witnessing a drop in traffic from the beginning of this year, the Kingfisher group shows a sharp decline of over 30% from the first quarter (Jan-Mar) of 2008 to the third quarter (Jul-Sep) of 2008.

The “perfect storm” of collapsing demand, increasing costs, and a global financial meltdown, has truly let loose its fury on the Indian domestic civil aviation industry. The FUD factor (Fear, Uncertainty, Doubt) is further curtailing traffic as India Inc., rushes to save costs. There is no doubt on the severity of the impact. The blame lies squarely with the airlines who followed a herd mentality and blindly rushed in to buying capacity, while growth was at 33% a year.

The airlines may not have had a plan to deal with 33% declines, but without a doubt, they need immediate rationalisation of the insane Aviation Turbine Fuel (ATF) taxation structure, that is killing the Indian civil aviation industry. It is time Mr. Murli Deora and Mr. P. Chidambaram start listening to the pleas of their cabinet colleague Mr. Praful Patel.

ATF price rationalisation may not solve all the problems, but at least, it is a start.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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No comments

  1. Devesh Agarwal
    October 21, 2008 at 18:22

    Hi Srivathsa

    You are very correct. August was only 3.3 million. Domestic passenger traffic is down 25% from the same period last year.

    We cannot even call this “serious corrections” anymore, this is an outright implosion.

  2. Srivathsa
    October 22, 2008 at 06:23

    Devesh,

    The first half of this fiscal is just 20 million domestic. Even if this goes up 25% in the second half that means the total traffic for the year is 45 million (somwhere between 42 and 47 million).

    What is Bangalore’s share of domestic? 10-12% is my guess. Which means that BIAL gets about 4.5 million domestic and maybe 3.5 million international.

    Right now their revenues are not affected as much because airlines have not yet resorted to extreme route rationalization. With KF and Jet “merging”, I expect schedules to fall and with that revenues to take a hit. I don’t know how BIAL will manage.

    Just how precarious the airlines’ financial position is can be seen from the fact that Jet refuses to use the aerobridges being a full service airline. They have huge outstandings with the PSU oil companies.

    Some ATF relief should be given, but with a business plan from the airlines on how they plan to go into the black

    Srivathsa

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