Domestic Air Traffic Doubles to Over 100 MN in 7 Yrs on Low Fares, Oil

India has seen double-digit passenger growth for 40 months in a row and has been the fastest-growing domestic air travel market

Strong passenger growth in the past three years has resulted in domestic air traffic crossing the 100-million mark in 2017. The surge in the past 36 months has been fuelled by low crude oil prices, discounts, and capacity addition in the domestic market. Air traffic crossed the 50-million mark some time in 2010, and passenger growth has doubled in the past seven years. In 2017, domestic airlines carried over 116.7 million passengers, a growth of 17.4 per cent over 2016. ALSO READ: A first for Indian skies: Domestic air traffic crossed 100 million in 2017 After a dip in traffic in 2012, growth in the domestic market has been on a rebound since 2013. The collapse of Kingfisher Airlines in October 2012, rise in fares and user fees in airports resulted in an over three per cent drop in traffic in 2012 over 2011. While there was a recovery in traffic in 2013 and 2014, a combination of benign fuel prices and capacity expansion contributed to 20 per cent-plus growth in 2015 and 2016. "The high growth phase was on account of rising economy, low crude oil price, fleet expansion, and cutthroat competition. The only dampener is choked infrastructure at leading airports," said Amber Dubey, partner and India head (aerospace and defence) at KPMG. "The single biggest growth driver has been lower air fares. Fares have reduced 30-35 per cent in the past three years," said Sharat Dhall, chief operating officer of Yatra.com. India has seen double-digit passenger growth for 40 months in a row and has been the fastest-growing domestic air travel market. According to the International Air Transport Association, the price of Brent crude oil fell from $99.9 a barrel in 2014 to $53.9 a barrel in 2015 and further reduced to $44.6 a barrel in 2016.
Brent crude crossed the $70-per barrel mark this month, the first time since March 2014. Lower oil prices have helped domestic airlines to expand capacity and offer cheaper fares. "The seven years that the country took to get from the 50-million mark to the 100-million mark was largely aided by IndiGo, which grew it's capacity by 4.5 times. The momentary slump in Kingfisher operations, which operated more than 60 plus aircraft, in 2011 has been more than recovered with IndiGo inducting 100 plus planes between 2011-2017. SpiceJet started inducting Bombardier Q400 planes, which opened up new routes, while the launch of AirAsia India and Vistara helped to boost growth," said Ameya Joshi, founder of aviation blog networkthoughts.in "Industry-wide domestic seat capacity has grown over 55 per cent since 2015. The total daily seats on offer have risen to 0.44 million in summer schedule 2018 from 0.28 million seats in 2015," said an executive from a private airline. "The demand has been largely induced by low fares and airlines have been able to maintain high load factors because of discounts. Most of the discounted tickets on offer now are for seasonally weak months like February-March," he added. While industry-wide load factors went up two percentage points to 86.1 in 2017, airfares remained low. According to data compiled by online portal MakeMyTrip (in the first week of January), the average industry-wide fares for same-day and next-day travel reduced 9-11 per cent compared to last January. "Affordability will continue to drive demand and we will see an unprecedented number of Indians taking to the skies each day. The government's aggressive push for its regional connectivity scheme, UDAN, is set to be the next tipping point, which will make flying accessible to millions of Indians by encouraging airlines to fly to under-served airports," said Rajesh Magow, co-founder and CEO of MakeMyTrip.

 

 

 

Reference - http://www.business-standard.com/article/economy-policy/domestic-air-traffic-doubles-to-over-100-mn-in-7-yrs-on-low-fares-oil-118012300561_1.html