Omciron-led curbs across States pose serious threat to domestic air passenger recovery: ICRA


States announcing restrictions on domestic travel in view of rising Omicron cases post a “serious threat to domestic passenger traffic recovery in the near term”, according to Suprio Banerjee, Vice-President and Sector Head at credit ratings agency, ICRA.

Few States like West Bengal have already announced curbs on flights to and from Delhi and Mumbai, and carriers have also announced change in schedule to these places. Moreover, IndiGo in a recent statement has said that it was expecting a 20 per cent cut in scheduled domestic flight operations in view of rising Covid cases leading to cancellation in travel plans.

Domestic air passenger traffic grew by 5-6 per cent at 111 lakh in December 2021, compared to 105 lakh in November 2021. The sector saw a y-o-y growth of 52 per cent, wherein passenger traffic stood at 73 lakh in December 2020.

Capacity deployment

The airlines’ capacity deployment for December 2021 was at around 35 per cent higher, y-o-y, with 86,465 departures in December 2021 (against 64,002 departures in December 2020). On a sequential basis, the number of departures in December 2021 was higher by 7 per cent.

According to Banerjee, December average daily departures were at 2,800, notably higher than the average daily departures of 2,065 in December 2020, and somewhat higher than 2,700 in November 2021.

“The average number of passengers per flight during December 2021 was close to 129, which was largely flat compared to November 2021. Though sequential recovery continued in December 2021, largely driven by leisure travel, boosted by calendar year-end festive and holiday travel, demand continues to remain subdued from the corporate traveller segment, as reflected by the passenger traffic for 9M FY2022 remaining 44 per cent lower than 9M FY2020,” he said.

The suspension of scheduled international operationshas been extended till January 31, 2022, given the threat of the recent emergence of a new variant of Covid-19.

ICRA has also raised concerns on aviation turbine fuel (ATF) prices, which have seen a sharp increase of 49 per cent on a y-o-y basis till January 2022. This, coupled with relatively low capacity utilisation of aircraft fleet, will continue to weigh on the financial performance of Indian carriers in FY2022.

Furthermore, the credit profile of most Indian carriers continues to be characterised by a weak liquidity position, it added.

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