Jet’s grounding to hit aviation industry hard

Mumbai: The halting of operations by Jet Airways will only add further worries to the Indian aviation industry, which was already hit hard by factors like capacity, increased airfares, passengers inconvenience and so on.

The latest study by ICRA on the Indian aviation industry suggests that the recent groundings of aircraft of the Indian aviation industry has already hit its total capacity hard, resulting in increased airfares and more inconvenience to the passengers, thereby affecting passenger traffic growth.

As on date, 98 of the total 670 aircraft in the industry have been grounded. These include 86 aircraft (75 per cent of total fleet) of Jet Airways grounded due to non-payment of lease rentals to the aircraft lessors owing to its liquidity problems, and 12 aircraft (16 per cent of total fleet) of SpiceJet grounded as required by a regulatory directive post technical issues reported with the flight control software of the Boeing 737 Max (B737 Max) aircraft, the ICRA study pointed out.

“These groundings have impacted nearly 15 per cent of the total industry capacity. The consequent flight cancellations have resulted in nearly 30-40 per cent increase in airfares over September 2018 to March 2019. However, India being a high price sensitive market, this has impacted the domestic passenger traffic growth from October 2018 onwa-rds, with the Q3 FY2019 Y-o-Y growth reduced to 12.4 per cent, as against the H1 FY2019 Y-o-Y growth at 19.8 per cent. In fact, the domestic passenger traffic growth in January 2019 reached a 53-month low of 8.9 per cent year-on-year basis. The passenger traffic growth for March 2019 is expected to be lower than that in February 2019,” said Kinjal Shah, vice president and co-head, corporate sector ratings, ICRA.

Interestingly, while the increased air fares are likely to support the profitability of the airlines in an environment of high costs, the impact on the passenger growth does not bode well for the aviation industry.