Growth in passenger traffic on airlines grew by nearly 10% in April compared with the same month in 2007, as per the latest data released by India’s aviation regulator Directorate General of Civil Aviation or DGCA, continuing the trend of slower growth in the business since January.
In 2006 and 2007, passenger traffic grew 25-30%, even as rapid fleet expansion by airlines resulted in demand exceeding supply and ticket prices falling. That resulted in a consolidation.
In the first three months of 2008 (January-March), passenger traffic grew 11.12% over the same months in 2007.
The corresponding growth rate in 2007 was 39%.
The lower growth rate of 9.69% in April will likely not surprise analysts who have been expecting it because airlines have slowed their fleet expansion plans and the high prices of jet fuel have led to increased fares.
Domestic airlines ferried 3.89 million passengers in April compared with 3.54 million in the same month in 2007 and 2.60 million in April 2006.
One analyst said a 10% growth rate was still respectable compared with the global average. “It’s a healthy sign that the industry is growing” at this rate when globally, growth rates are around 6%,” said Mark Martin an analyst with audit and consulting firm KPMG’s India office.
“By no means the message is that the passenger is not choosing to fly anymore. (The) cost of air travel today is practically half to what it was eight years back. Don’t forget Delhi-Mumbai economy use to cost Rs7,800 in 2001, that same ticket is now Rs4,800 on an average,” he added.
Airlines will have to learn to live with the lower growth rates, said SpiceJet’s chief commercial officer Samyukta Sridharan, and be prepared to take a hit on short-haul sectors if the fuel prices continue to rise. “This is going to be a difficult year,” he said.
Sridharan added that because of the rise in fares, “cost-sensitive passengers” who can take an overnight train to their destinations will probably do that.
Those routes, he said, “will continue to take a beating. Thankfully, the capacity addition has come down to a level that it will match the market growth rate.”
Overall, Jet Airways (India) Ltd, together with its subsidiary JetLite (India) Ltd, remained the market leader with a share of 29.6% , followed by UB Group-owned Kingfisher Airlines Ltd and low-fare carrier Deccan with 27.9%. National Aviation Co. of India Ltd-run Air India had a share of 15.1%.
Unless jet fuel costs become half of what they were last year, airlines should forget the boom of the past two years, said SpiceJet’s Sridharan.
“It’s a demand-elastic world,” he added.