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NEW DELHI : Price wars triggered by the entry of two new airlines Akasa and Jet Airways 2.0 is likely to add pressure on the load factor and yield of incumbents due to the excess supply in a market recovering from a pandemic, which in turn will weaken the health of India’s aviation sector, HSBC Global Research said in a report on Friday.

“While demand recovery may resume in Q2CY22 (April-June), causing some optimism, it could be short-lived as the two new airlines plan to start operations in H2CY22 (July-December)," the report, titled Indian Aviation, 2022: A year of two halves, said.

“Amid all these challenges, investors are concerned about the yield outlook.... we think the fare war could be an obvious outcome of excess supply in the market. On our calculation, the industry could add 80-85 aircraft this year which may increase the gap between demand and supply, adding pressure on the load factor and yield," it added.

Domestic air passenger traffic has fallen significantly since the beginning of January due to the third wave of covid-19 infections. In the last 10 days, domestic air passenger traffic fell by more than 45%. The report, however, said there is optimism about a quick recovery from the third wave as countries in Europe and Africa are recording peak levels of infections for shorter durations and milder impact than the previous waves.

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