Domestic Air Traffic To Decline By 41-46% In FY21 Due To Covid-19: Icra

The recommencement of commercial passenger flight services in a graded manner is unlikely to help the domestic aviation industry recover in the current financial year with domestic air traffic expected to shrink by 41-46 per cent and international travel demand by a negative 67-72 per cent year-on-year owing to Covid-19, a report said on Friday.

The domestic passenger flight services restarted from May 25 after a two months hiatus due to the lockdown in the wake of coronavirus pandemic. The international operations, however, remained suspended since March 22 for similar reasons.

The government on Friday extended the suspension of scheduled international flights till July 30. It, however, said that some international scheduled routes may be permitted on a case-to-case basis.

"As per our study, though restricted recommencement of domestic air traffic has begun, this will in no case help the industry to recover the lost ground in FY2021. However, H2 FY2021 will witness some recovery, with Q4 FY2021 witnessing a degrowth of just 3-14 per cent y-o-y in domestic with improved passenger load factors (PLFs)," ratings agency Icra said in the report.

Icra said it expects the impact of the Covid-19 outbreak to be more profound and long-lasting on international travel compared to domestic travel, and "overall FY2021 is expected to witness around 41-46 per cent de-growth in domestic passenger traffic while the international passenger volume are likely to witness a significant de-growth of about 67-72 per cent y-o-y."

The international traffic may improve sequentially, with the March quarter of the fiscal likely to witness a de-growth of 30-40 per cent y-o-y, it added.

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The domestic passenger traffic has gradually increased from 30,550 on Day 1 (of recommencement) with a peak of 72,583 on Day 21. Since then, the same has remained above 58,000 (till Day 37, which was June 30, 2020).

"In the similar period, the number of flights departing has also gradually increased from 416 on Day 1 to 723 on Day 37, with a peak of 826 flights on June 22, 2020. However, this is significantly lower than the average daily departures of 2,882 flights in June 2019," said Kinjal Shah, Vice President, Icra.

According to Shah, the domestic airlines are operating at a lower capacity total of 21,696 departures in June 2020, as against 86,456 departures in June 2019, resulting in a 74.9 per cent reduction y-o-y in capacity deployment.

For June, the domestic passenger traffic was 1.95 million, as against 11.2 million in June 2019, a de-growth of 83.7 per cent over the year-ago period. The average number of passengers per flight during June was 90, as against an average of 139 passengers per flight in June last year, Icra said.

"Thus, it is estimated that the domestic aviation industry operated at a PLF of about 58 per cent in June, as against 89.3 per cent in June 2019, that too on very low capacity. For May (25th to 31st), the first-week domestic passenger traffic was 260,000, as against 11.56 million in May 2019, resulting in a y-o-y de-growth of 97.7 per cent," she said.

However, under the Vande Bharat Mission (VBM) for the evacuation of Indian citizens from foreign shores, which started from May 7, the international passenger traffic (inbound and outbound) has been 2,26,675 for the period between May 7 and June 30, which is a de-growth of 93.7 per cent over May and June 2019, Icra said.

As for aviation turbine fuel (ATF) prices, following the pandemic outbreak, crude oil prices declined materially reached a low of around $19/ barrel in April, thereby leading to a decline in ATF prices, as per the ratings agency.

However, crude oil prices have increased gradually since then, and currently ranges around $41/ barrel. Consequently, the ATF prices have also increased sequentially by 13.3 per cent in June, and by 24.1 per cent in July, it said.