These numbers were surprisingly the same in October 2019, when the capacity in Indian skies had recovered from the fall of Jet Airways. The last October saw 1,14,00,977 passengers while October 2021 saw 89.85 lakh passengers as the industry was still under the various caps for fares and capacity.

The industry was expected to make a big move over pre-COVID but the last few weeks have seen the momentum slow down.

Constrained by capacity or end of revenge travel?

The flights deployed by airlines on domestic segments are 4% lower in October 2023 compared with October 2019. The month of October 2019 had seen 93,950 domestic departures. This translates to 120 fewer flights a day. The growth of IndiGo and the addition of Akasa Air has not been enough to tide over the fall of Go FIRST and shrinking SpiceJet.

Indian travel is more aligned to festivals and Diwali was in the last days of October 2019, unlike this year when it is in November. Is the problem only on the supply side? It does not look like, since last month when the number of departures were similar, the traffic was higher per day. September has traditionally not been a great month for travel. This possibly marks the beginning of the end of “Revenge travel”, a phenomenon which had seen a sudden spike in travel demand, to the extent that airlines were finding it difficult to keep up with the demand.

A return to office diktat by companies, pressure in the IT industry – which offers one of the highest employment opportunities in India and inflation pressures leading to curtailment of discretionary spending are other factors which could be impacting travel in the immediate term. Airlines, which have traditionally stimulated the market by lower fares, do not have the luxury to drop fares in a high-cost environment where oil prices have steadily climbed up and the rupee has weakened against the dollar, ensuring that the lease bill goes up.

Headed towards over-capacity?

Air India Express has said that it would induct 50 planes over the next 15 months and as a group they would induct one plane every six days on an average. SpiceJet already has a few wet-leased aircraft operating and IndiGo will get a handful soon, with the first one already flying.

This will lead to a sudden spike in capacity, but will high-yielding passengers follow? With limited ability to drop fares and the current trends for Diwali showing elevated fares only on peak days, a windfall profit like Q1 of FY24 looks a distant possibility now. The question on the other hand is, can airlines fly more domestic passengers this quarter than they did in FY20. The domestic industry averaged 4,14,900 passengers in the Oct-Dec quarter of 2019. October this year, averaged at 4,07,567 passengers per day. The asking rate now for November and December stands at 4,18,626 daily passengers surpassing the all-time high witnessed by the industry in 2019.

As there continues to be a suspense over the number of aircraft which may need to be grounded over the next few months for Pratt & Whitney engine checks, the additional aircraft which IndiGo is deploying by means of a wet lease could well be to tide over that capacity and not incremental capacity in true sense. This could well be a blessing in disguise if the air traffic does not show a steep jump.

Tail note

All eyes are now on Diwali and airlines can pull a record number of passengers. Can the domestic industry cross the all-time high figure of 4,56,082 passengers recorded on April 30 this year? Only 2978 flights were deployed to achieve this number and we are very close to that deployment right now. The next few days will tell us how IndiGo has performed in Q2 and if the industry can pull a rabbit out of its hat this Diwali. If not, the tough times will last longer.

Ameya Joshi is an aviation analyst.

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