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Air traffic nears 250k daily; PLF at 75%; improving traffic and higher flying capacity should lead to lower losses

Air traffic in terms of passenger and PLFs has improved in line with seasonally stronger demand and reining-in of covid cases across the country. Government has also increased the allowable flying capacity to 85% of pre-covid level in the domestic segment.

With daily traffic at ~250k levels, crude at US$75/bbl, no major supply cuts by any airline and a long road to recovery for the international segment, profits remain distant. However, higher flying capacity and seasonally strong Q3 should help limit losses.

* Air traffic trends – to gradually cross the 250k daily mark: Weekly average daily fliers came in at 234k in the week ended (W.E) 18th Sept’21 vs 222k in W.E. 11th Sep’21. For W.E. 18th Sep’21, average number of departures rose to 2,039 vis-à-vis 1,982 in the prior week. The number of fliers per departure increased to 114 vs 111 in the prior week.

* PLFs improved across airlines in Aug’21; Sep’21 PLFs have remained strong. As per data release from DGCA, total PAX in Aug’21 came in at 6.7mn, up 137% YoY on a low base. PLF of all airlines improved sequentially during the month. Indigo saw largest improvement in PLF (from 66% in Jul’21 to 74% in Aug’21) followed by Air Asia (from 54% in Jul’21 to 60% in Aug’21).

Amongst all airlines, SpiceJet reported highest PLF (80%) in Aug’21. In terms of weekly trend (13th-18th Sep’21), Indigo / SpiceJet reported PLFs of 73% / 77% respectively. Market shares of Indigo / SpiceJet stood at 57% / 8.7% respectively, down 160bps / 40bps sequentially. Air Asia’s market share improved to 5.2% (up 190bps sequentially).

* Government increases cap on airline capacity: Ministry of civil aviation has raised the limit on airline capacity from 72.5% to 85% of pre-covid levels. It has also reduced the number of days beyond which an airline can set its own prices to 15 days (from earlier 30) from the date of booking. Thus, airlines will now have to issue tickets within the regulated bands only in the current window of next 15 days.

* Update on Air India bids: Final bids for acquiring Air India were submitted by Tata Sons and SpiceJet promoter Ajay Singh. The reserve price of the airline will be decided by an inter-ministerial group headed by Department of Investment and Public Asset Management (DIPAM) based on inputs from government-appointed valuers. Government aims to finish the process of selecting the winner of the bid within the next three weeks.

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