Wednesday, January 14, 2009

Air traffic dips 5% in 2008 on ATF price rise

NEW DELHI : Spike in fuel prices cast its shadow on the country�s aviation sector in 2008 which witnessed a decline of nearly 5% in passenger
traffic, according to government data.

This is the first time in several years that passenger traffic witnessed a dip. The last decline was witnessed in 2001-02 following the 9/11 terrorist attack in the US. Domestic airlines such as Air India, Kingfisher Airlines and IndiGo flew 40.77 million passengers in 2008 compared to 42.85 million passengers in 2007. Low-cost airlines IndiGo and SpiceJet among others, however, bucked the recessionary trend during the year. IndiGo registered a 46.53% jump in its customer base during this period.

Double-digit growth in the aviation sector began to fumble since April, as airfare climbed north following a spike in prices of aviation turbine fuel (ATF). In the following months, fare on most of the sectors witnessed a jump of 60% jump and in some cases even 100%.

With consolidation in the domestic skies, cheaper fare options offered by budget airlines such as SpiceJet, IndiGo and Deccan almost vanished. Mounting losses mainly on account of high fuel price and excess capacity also forced airlines to keep their tariffs high. Besides, air-carriers also cut capacity to rationalise their operations.

�Nearly 23 aircraft operated by scheduled carriers got de-registered from India in 2008. Non-scheduled carriers also sent back their aircraft to the lessors during this period. The country�s largest private carrier Jet Airways wet-leased four of its aircraft last year,� an official in the directorate general of civil aviation (DGCA), who did not wish to be named, said.

However, lately domestic carriers have begun to witness improvement in their financial health with fuel prices plummeting by nearly 54% since September last year. After showing resistance to bring down fare, airlines have begun to pass on the benefits of lower fuel prices to customers. National carrier Air India slashed its basic fare in the range of 35-82% across various domestic sectors. Other airlines such as Kingfisher, SpiceJet and IndiGo also followed suit later.

But, these fare cuts have not brought back passengers to these airlines with the slowdown looming large on the economy. In fact, domestic air traffic declined sharply by 17% in December, 2008 to 3.23 million.

�Even the massive cut in airfare is not creating enough demand. This is despite budget airlines offering an average fare of Rs 3,000 on most of the sectors. Network carriers are charging a little over Rs 4,000 for the same sector. Business sentiment is down due to a downturn in the economy. The Mumbai terror attack has also affected the traffic to some extent,� a top airline official, who did not wish to be quoted, said.

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