News Backgrounder
Rush to fill route gap after Jet Airways grounding
July 1st 2019
The collapse of Jet Airways is a dramatic pause in the remarkable rise of India’s commercial aviation market. Read More »
But that won’t last for long said consultancy, CAPA. Fellow analysts with an eye on India collectively agree. Growth is forecast to resume by the end of September with the country’s three leading LCCs predicted to report record profits.
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India has long been one of the world’s fastest growing aviation markets, consistently reporting annual air traffic expansion in excess of 20%. “After a sustained period of very strong growth, Revenue Passenger Kilometres (RPKs) in the domestic India market are 0.5% lower in April than their year ago levels, down from a 15% year-on-year pace as recently as December,” the International Air Transport Association (IATA) said in its latest global passenger forecast. The market has since improved.
“This is the first negative growth rate in more than five years and is largely due to the demise of Jet Airways,” IATA said.
“This sizeable supply side interruption has not yet been offset by other carriers, resulting in Available Seat Kilometres (ASK) growth slowing sharply to 0.5% year-on-year compared with an averaged pace of 15% in the past two years. More broadly, rising airfares in recent months likely have weighed upon passenger demand.”
Nevertheless, CAPA said the three leading Indian LCCs - IndiGo, SpiceJet and GoAir - will be in the money and could be reporting record profits in their 2019-2020 fiscal years. “IndiGo alone could be on track to report a profit of US$400-$500 million. Meanwhile, the combined fleet size of Indian LCCs is expected to cross 500 aircraft this year,” the consultancy said.
Overall, domestic air traffic growth will be “muted”, with a full-year increase expected to be below 5% percent year-on-year. After the Jet Airways crisis “recovery in the international sector may take one to two years”, with international traffic to remain “flat at best” with a possible decline of up to 5%, CAPA said.
Jet Airways has been grounded since April 17 and although it says the shutdown is “temporary” there are doubts it will return to the air. Lessors have taken back their planes from the airline and the Indian government has distributed the carrier’s domestic and international rights, temporarily, to rival airlines.
A large number of Jet’s aircraft, which lessors have claimed due to lapsed payments have been leased to SpiceJet.
“SpiceJet is strengthening and emerging as the clear No.2 airline in the market. Within 12 months, its domestic share could approach 25% of the market, a size that accords it strategic importance in the sector. This is a tremendous achievement for an airline that was within hours of closure less than five years ago,” CAPA said.
The Jet Airways crisis has left a significant gap in the international market, which will encourage airlines such as IndiGo, SpiceJet and GoAir to increase their focus on international opportunities. Indian LCCs are expected to add 40 narrow bodies to their international operations in 2019 to 2020.
