Domestic carriers add flights as demand up

Domestic carriers add flights as demand up

Buoyed by rising passenger traffic over the previous six months, India’s domestic airlines have added at least 1,300 weekly flights this year, a government official said.

The number of weekly flights has risen from an average 10,095 in January to 11,400 in November, he said, asking not to be named. This marks a sharp departure in the cutbacks introduced in 2008 because of sluggish demand.

Data from the Directorate General of Civil Aviation show airlines are likely to end 2009 with a jump in passengers carried.

In 2008, airlines had flown 40.77 million passengers, a slump of 4.84% from 42.85 million the year before.

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This year, between January and November, airlines have already carried 39.96 million passengers, a 5.45% increase over the year-ago period.

“There have been only two months in the past two years when passenger traffic has been four million—December 2007 and May 2008," said Samyukth Sridharan, chief commercial officer, SpiceJet Ltd. “I would expect December to beat all those numbers."

He expects December traffic to touch 4.4 million at least.

“The industry capacity has gone back to 2007 levels and so has demand as of November," he said.

This means any increase in flights or passengers carried from now on will be a growth story in aviation.

“The only change is that demand is kind of coming back, but at the same time you cannot ignore the pricing that was prevalent last year," a domestic airline executive said.

Crude oil prices that had peaked last year have remained on an average at $60 a barrel, and fares have come down to an average Rs3,400 from around Rs4,000 in the last quarter of 2008.

“Last year, the demand was suppressed because of higher prices, which was visible in the numbers. Today, the pricing is lower so certainly there is some spurt in the numbers," he added.

In a further reduction in fuel prices for the fortnight, Indian Oil Corp. Ltd, the country’s largest refiner, will decrease jet fuel prices by 1.6% starting Wednesday, a company official said.

The price in Mumbai, home to the country’s busiest airport, was reduced to Rs40,560 a kilolitre from Rs41,236.73. This, however, may not lead to a reduction in ticket prices as December is peak season for air travel.

However, as the international airline grouping International Air Transport Association said in its 2010 financial outlook for the sector on Tuesday, oil prices could rise to an average $75 a barrel in 2010 from $61 in 2009, and that could rally domestic ticket prices further next year.

Bloomberg contributed to this story.