ICRA sees continued recovery in air travel despite curtailed business and leisure travel

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According to ICRA, the domestic air traffic has shown a continued recovery in August at 65-66 lakh passengers, leading to a sequential growth of 30-31 percent.

ICRA sees continued recovery in air travel despite curtailed business and leisure travel
The domestic air traffic has shown a continued recovery in August at 65-66 lakh passengers, leading to a sequential growth of 30-31 percent, ratings agency ICRA has said.
While the demand for air travel rose in August, there is continued stress on-demand as people continue to limit their travel to only necessary travel, ICRA noted.
"The average number of passengers per flight during August 2021 was 114, against an average of 106 passengers per flight in July 2021. Though the recovery continued in August 2021, there is continued stress on demand, driven largely by the second wave of the pandemic, limiting travel to only necessary travel, while both leisure and business travel have been curtailed due to various state-wide restrictions, despite the decline in infections," Kinjal Shah, vice president & co-group head – corporate ratings, ICRA said.
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The domestic capacity deployment by airlines was around 99 percent higher at nearly 57,500 departures in August, 22 percent higher on month.
For August, the average daily departures were at around 1,900, significantly higher than the average daily departures of around 900 in August 2020, and higher than about 1,500 in July 2021, though it remains lower than nearly 2,000 in April 2021, ICRA added.
After a two-month shut down due to the pandemic, the government opened up the civil aviation sector, permitting airlines to deploy up to 33 percent of flights with effect from May 2020. Currently, airlines are permitted to deploy up to 72.5 percent of their flight capacity.
The government had also increased the minimum and maximum fare band by 10-13 percent for domestic flights with effect from August 12, 2021, until August 31, 2021.
"In ICRA's view, the price increase may not materially impact the passenger traffic demand as in the current scenario, travel is limited to only necessary travel while both leisure and business travel have been curtailed due to various state-wide restrictions and the spread of the infections. However, it will allow airlines to recoup some part of the increase in ATF prices, thereby cushioning some impact on the airline's losses," Shah added.
As for the aviation turbine fuel (ATF) prices, until February 2021, they were lower on a YoY basis while in March 2021, April 2021, May 2021, June 2021, July 2021, and August 2021 prices were higher by 3.0 percent, 59.8 percent, 103.4 percent, 86.3 percent, 59.7 percent, 55.3 percent, respectively, on a YoY basis.
In September 2021, the prices have been higher by 54.6 percent on a YoY basis, attributed to the low base of September 2020, when the prices declined Y-o-Y by 32.2 percent due to the impact of the pandemic, ICRA added.