Air traffic

Domestic air traffic drops 43% in January as Covid-19 hits

Indian domestic air traffic fell nearly in half in January from the previous month as the third wave of the Covid-19 pandemic, led by the Omicron variant, peaked across the country.

Domestic passenger traffic fell by around 43% to about 64 lakh in the first month of 2022 from 112 lakh in December 2021, according to a report by rating and research firm ICRA. On an annual basis, the decline was approximately 17%.

Capacity deployment by airlines for January 2022 was around 7% lower than in January 2021, according to the report. This comes even as the Ministry of Civil Aviation has authorized the deployment of 100% capacity on domestic routes from October 18, 2021.

On a sequential basis, departures in January decreased by around 27% due to the emergence of the new variant of Covid-19, the report said.

The rating agency maintained its negative outlook for the aviation sector as it expects the recovery of air traffic to pre-Covid-19 levels will be slow due to continued travel restrictions international markets and weak demand from the business travel segment.

Despite the improved pace of vaccinations, the threat of the new variant has also impacted the leisure travel segment, he warned.

Lower capacity utilization as well as a sharp rise in aviation turbine fuel (ATF) prices will continue to weigh on the financial performance of Indian carriers in fiscal 2022, the rating agency warns. ATF prices in February 2022 increased by 59.9% on an annual basis due to the February 2021 low base.

ICRA expects industry profits to be negatively affected in fiscal 2022 due to lower revenues. Debt levels are expected to remain high for the industry and are expected to be in a range of around ₹120,000 crore (including lease debts) for the financial year 2022, the report says.

The aviation industry needs additional financial support of ₹45,000-47,000 crore between fiscal years 2022 and 2024, according to the rating agency.

Domestic passenger traffic in January 2022 is the lowest since August 2021, following the ebb of the second wave of the pandemic.

The Ministry of Aviation had reduced authorized capacity deployment to 50% of pre-Covid levels from June 1, 2021 due to the resurgence of the second wave.

The authorized capacity deployment was gradually increased to 65% from July 5, 2021, then to 72.5% from August 12, 2021 and to 85% from September 18, 2021. The ministry removed restrictions on the capacity deployment authorized from 18 October 2021.

The aviation regulator, the Directorate General of Civil Aviation (DGCA), had previously extended the suspension of scheduled international commercial passenger services to and from India until February 28.

ICRA, however, expects the rollout of ePassports in 2022-23 to improve travel convenience for passengers, which will boost international travel.

Meanwhile, InterGlobe Aviation, the parent company of low-cost carrier IndiGo, reported a surprise third-quarter profit earlier this month. The low-cost carrier’s net profit rose to ₹129.8 crore for the quarter ended December, from a loss of ₹620 crore a year ago.