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Aviation Sector To Suffer Due To Excess Capacity

Indian airlines have faced near-constant turbulence ever since the pandemic. The capacity development equation has remained constant worry for the sector, followed by volatility in fuel prices and weak rupee. Initially, the sector witnessed the worst nightmare in the form of grounded aircraft for two months during the national lockdown, and later the demand slumped.

Contrarily, high airfares attributed to the inflammatory environment made people postpone their travel plans. “Since last year, there has been an unprecedented rise in jet fuel prices, which was further aggravated by the Russia-Ukraine war, which in turn pushed fares, impacting leisure travel demands”, said Suprio Banerjee, vice president ICRA Ltd.

India’s largest airline in India, with a 58 per cent market share in domestic aviation market, reported losses in nine out of the past 10 quarters. The government cap on capacity development by airlines ranging from 33% to 85% from May 2020 to October 2021, generated excess capacity which remain unfulfilled due to covid-related restrictions. However, the government removed the cap in October last year, the aviation sector faced another problem as airlines had to deploy 100% capacity to meet the demand.

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