The crash of Naresh Goyal-founded Jet Airways continues to reverberate in the domestic aviation as industry capacity remains muted as of July 2019. The air passenger growth has also dipped to 1.8% due to flat capacity growth and end of tourist season. While July is a traditionally weak season for the aviation industry, the eventual discontinuation of the operations of Jet Airways and domestic airlines expanding more on international routes than domestic routes has caused a subdued capacity growth measured in ASKMs, which has led to slower growth in passenger traffic, Kinjal Shah, Vice President and Co-Head, Corporate Sector Ratings, ICRA, said.
Jet Airways had shut operations on 17 April 2019, after which, many airlines jumped in to fill the void created by the cash-strapped airline. However, the same has not spelt much success either in ramping up domestic or international capacity. While the domestic carriers have been increasing focus on international operations as is evident by increased capacity deployment, “the Indian airlines continue to underperform the industry on international routes with passenger traffic de-growth of 14.7% in July 2019, as against 0.6% for the industry,” ICRA report said. Further, the market share of domestic airlines on international routes by 528 basis points on-year.
On the domestic front, the muted capacity on Indian routes meant a slow passenger growth as domestic airlines focused more on the international play, a previous report by ICRA said. “Indigo and SpiceJet together accounted for about 62.8% of the domestic airline industry capacity during June 2019 … However, the addition has been higher on the international routes than domestic, thereby impacting the overall domestic industry capacity addition,” Kinjal Shah said last month. Going ahead, more domestic airlines are expected to go ahead with the international expansions due to market potential. With the gradual correction in supply-demand, airfares are likely to cool off and domestic passenger traffic growth is expected to rise, ICRA added.