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Omicron could delay recovery in domestic aviation industry to FY24: Crisil

Daily domestic air passenger traffic has fallen sharply since December due to concerns regarding the Omicron variant of coronavirus. (Photo: Mint)Premium
Daily domestic air passenger traffic has fallen sharply since December due to concerns regarding the Omicron variant of coronavirus. (Photo: Mint)

  • Airlines have reduced the number of flights over the past few days due to declining traffic in the wake of the fresh wave of infections. If cases surge further, traffic slump can worsen. Travel restrictions imposed by state governments have also added to the decline

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NEW DELHI: India's third wave of the covid-19 pandemic, following the spread of highly virulent Omicron variant, could lead to fresh turbulence for air traffic, delaying the domestic aviation industry's recovery to FY24 from FY23, CrisilRatings Limited said in a statement on Thursday.

"This spill-over impact is likely to delay recovery of air traffic from our earlier expectation of it happening in fiscal 2023. However, recovery is expected to be achieved within early part of fiscal 2024. This is because air traffic is likely to rebound faster this time around, compared with the second wave, when it took from May to November 2021 to recover from about 16% to 85% of the fiscal 2020 traffic," the report said.

"The rebound confidence is underpinned by higher proportion of vaccinated populace--over 71% now vis-à-vis only about 5% as of end May 2021--as well as learnings of governments and authorities from the past waves in implementing Covid-19 protocols for safe travel. The caseload, too, is expected to peak in February and return to the December 2021 level by the end of March 2022," the report said, adding that as a result revenues of airlines and airports are likely to remain stable for fiscal 2023 and 2024 .

"What will further aid revenues is the expected uptick in tariffs. As per the recently released tariff orders for the Bengaluru and Hyderabad airports, the tariffs will more than double from April 2022," it added.

Daily domestic air passenger traffic has fallen sharply since December due to concerns regarding the Omicron variant of coronavirus.

About 191,895 passengers took domestic flights on 12 January this year, showed data from the aviation ministry. However, this number is far below the 367,000 recorded in the week ending 25 December 2021.

Airlines have reduced the number of flights over the past few days due to declining traffic in the wake of the fresh wave of infections. If cases surge further, traffic slump can worsen. Travel restrictions imposed by state governments have also added to the decline.

"The high infection rate of Omicron has resulted in several state governments and local authorities, such as Delhi and Mumbai, announcing restrictions on movement. In fact, domestic traffic is down by 25% from the highs of December 2021 in the first week of January 2022 itself," said Manish Gupta, senior director, CRISIL Ratings.

"Both personal and business travel will take a hit in January and February, leading to air traffic plunging an estimated 30% sequentially in the fourth quarter of this fiscal," said Gupta.

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