The aviation industry does not seem to have a fix to the sudden vacuum created by the exit of Go First as it grapples with capacity constraints leaving flyers to bear the consequence of free market dynamics with stubbornly high fares.
Airlines are sweating their assets to the maximum to catch up with demand which continues to outpace the seat supply in the market, as Go First completes a month of halted operations. On June 2, the passenger load factors (PLF) of six operational airlines controlling 92% of the market inched up to 90% from an average of 88% in April.
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The grounding of the entire fleet of Go First has pulled out around 30 aircraft from the market which served 830,000 customers in April. Existing airlines are finding ways to improve capacity to cash in on the demand surge.
IndiGo, the country’s largest carrier, will improve capacity by a third by adding 600 weekly flights to its current tally of 1,800, the company replied to FE. These, however, the additional flights include international flights also.
“It is encouraging to see the demand trend which continues to remain strong and rising in the summer season. Additionally, we have been adding new flights and capacity to support the rising demand,” said an IndiGo spokesperson.
“We are exploring readjusting aircraft type on certain routes to improve fleet optimisation. We can make do with a smaller aircraft instead of the usual large aircraft which can be deployed on busier routes where demand is high,” said an official from another airline.
While CAPA India, an aviation advisory and research practice, firm, predicted induction of 132 aircraft in FY24 by Indian airline companies, led by Air India’s 53 induction program followed by IndiGo’s 49, these are to be delivered over several months, subject to supply chain issues with the plane makers, getting resolved.
Jagannarayan Padmanabhan, senior director, CRISIL Market Intelligence and Analytics said, “There is no specific quick fix for easing the capacity issue. Schedules of airlines get fixed for six months in one go. If there is a significant demand for a particular route then there could be some rationalization of routes from some of the routes which have lesser PLF.”
“Supply-chain challenges being faced by aircraft manufacturers are likely to constrain their production schedules. Accordingly, that capacity addition for the industry will only be gradual,” said Suprio Banerjee, Vice President and sector head, corporate ratings, ICRA.
The exit of Go First has led to a surge in airfares especially for ‘last- minute travel’. Market watchers say that the fares are unlikely to soften on its own due to the strong demand, though the government is said to be holding talks with airlines to bring some correction in ticket pricing.
“Airlines look at strategies to expand their RASK-CASK (revenue per available seat kilometer – cost per available seat kilometer) spread, which becomes their core profitability metrics. Hence the airlines try to balance the costs through increase in fares without hampering the demand,” Banerjee added.
The aviation industry does not seem to have a fix to the sudden vacuum created by the exit of Go First as it grapples with capacity constraints leaving flyers to bear the consequence of free market dynamics with stubbornly high fares.
