Airlines emerging from Covid set to embark on new competition
After a mixed performance in the March quarter when air traffic rebounded from a pandemic-stricken January, the emergence of two airlines, Akasa Air and Jet Airways (India) Ltd, is expected to intensify competition in the industry widely. loss-making India which was looking to emerge stronger in the first quarter of the new fiscal year.
Akasa Air, backed by billionaire Rakesh Jhunjhunwala, plans to launch its first commercial flight around June, co-founder and chief executive Vinay Dube said at an industry event last month. Meanwhile, Jet Airways, under new ownership by the Jalan-Kalrock consortium, hopes to restore the stranded airline’s Air Operator’s Certificate (AOC) within two months, media said.
The revalidation of Jet’s AOC will allow the airline to resume commercial flights, nearly three years after being grounded due to a severe cash crunch.
Although demand has picked up, rising oil prices have been a drag, said a senior airline executive, who declined to be named.
“The emergence of Akasa Air and Jet Airways will mean more competition on certain routes. They will likely grow at the expense of smaller, financially weaker airlines,” the person said, adding that intense pricing competition is probable on certain routes with the entry of the two airlines.
Indian airlines will suffer losses of around $4 billion, excluding adjustments, in 2021-22, according to aviation consultancy Capa India’s mid-year outlook for the latest financial year. Actual losses could be larger as Brent prices have climbed more than 20% since February. On an annual basis, Brent prices are up 78%. Kerosene prices in India are currently at an all-time high.
However, an easing of restrictions on the international front means airlines can now operate scheduled international flights after a two-year pandemic-induced hiatus. International flights offer the opportunity to earn more revenue, with higher returns than domestic flights.
“Following the easing of restrictions, we are seeing a huge demand for international travel. We hope this improved connectivity with various destinations across the continent will give a boost to the travel and tourism sector while proving to be a catalyst for economic recovery,” said Willy Boulter, Chief Commercial Officer of IndiGo. “We started with over 150 flights from various destinations in India,” Boulter added.
A Vistara spokesperson said earlier that the resumption of scheduled international flights will boost demand and help the industry manage rising ATF (aviation turbine fuel) prices.
Other airline spokespersons had no comment.
Indian airlines have been allowed to operate up to 1,466 weekly international departures during the summer timetable between March 27 and October 29.
Among Indian airlines, IndiGo took the lion’s share with 505 weekly international departures, Air India (361), Air India Express (340), SpiceJet (130), GoFirst (74) and Vistara (56). However, a further rise in oil prices could leave airlines in a precarious position, as they may not be able to fully pass the cost on to passengers without affecting demand.
“With the ATF becoming more expensive, domestic flight prices have seen a sharp increase of up to 60% on some popular routes,” said Aloke Bajpai, co-founder and CEO of travel services group ixigo. “We have noticed an increase in search requests for travel due to pent-up demand; however, bookings are still not increasing due to searches due to high airfares. Travelers are still in wait and watch mode for see the best time to make reservations,” Bajpai added.
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