The economic slowdown couldn’t have come at a more inopportune time for India’s aviation sector. Domestic carriers have been adding new planes rather aggressively over the past few years, as passenger growth steadily inched up over the past four years. But the slowing economic growth and poor consumer sentiment is hurting airline financials.
Data from Directorate General of Civil Aviation (DGCA) showed that passengers carried by domestic airlines grew only marginally at 3.11% between January and October 2019, compared with a 20.11% growth during the same period in 2018. Weak demand, coupled with rising capacities, have forced airlines to slash fares. India’s second-largest carrier by market share, SpiceJet, posted a loss of Rs 462.6 crore in the September quarter, owing to unsustainably low fares. Margins of domestic carriers have also been impacted by higher fuel expenses. Although crude price is lower compared to FY19 levels, averaging at around $64.11/bbl so far in FY20, it is still much higher than FY18 levels, when the average was around $57.85/bbl.
