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Economy Jul 20, 2012

Domestic air traffic drops by 4% on rising fares

By Sindhu Bhattacharya

For the second month in a row, less people took to domestic air travel. According to data released by the DGCA today, traffic declined by about 4 percent in June over May to 51.08 lakh (53.12 lakh). Even demand declined by around 4.5 percent, the first time in a year that demand has become negative.

Another first was that in June, airlines did not add capacity (more seats) due to falling demand. Domestic air travel did not pick up this June due to the end of the peak travel season coupled with rising fares. But year-on-year, there was about 4 percent growth in traffic.

Analysts feel that the decrease in passenger demand was largely driven by high fares.

Reuters

But if the January-June period is considered, then the growth story in the aviation sector continues. In January-June, the domestic airlines flew 309.16 lakh passengers, an increase of 3.71 percent over the same period last year

And though the overall domestic air travel market remained sluggish, IndiGo continued to hold its top position in the pecking order. More than one in four domestic travellers now chose to fly IndiGo which held 26 percent share of the market in June; Jet Airways standalone commands only 20.7 percent share which means only about one in five domestic fliers opt for it. But taken together with subsidiary JetLite, the Jet group remains the largest single entity with 27.4 percent share of the domestic aviation pie.

SpiceJet was at third position with a market share of 18.6 percent , Air India (Domestic) languished at 16.8 percent while cash-starved Kingfisher Airlines was at the bottom of the list with a market share of just 4.2 percent- not even one in 20 passengers chose to fly the King of Good Times! Go Air was at 6.9 percent

The dwindling demand for seats on domestic flights was evident with load factors of even IndiaGo - which managed to fill most seats at 86.5 percent (86.3 percent ). This was the highest seat factor in the industry and it meant that IndiGo planes had more than 8 out 10 seats occupied. IndiGo and Air India were the only two airlines which reported even a marginal increase in seat factors this June- everyone else had a harder time filling seats with paying passengers than in June last year. The sharpest decline, as expected, was seen in Kingfisher which managed to fill a little over half its aircraft at 62.2 percent (73.3 percent ) despite operating only a fourth of the number of aircraft it was operating last June.

Domestic air travellers not only have to contend with higher ticket prices now, some airlines like Jet Airways and Air India have almost stopped paying travel agents any commission, which means these agents are now charging the traveller for services. This will raise ticket prices further.

by Sindhu Bhattacharya

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