Govt asks airlines to expand capacity to 50% from current cap of 33%

Topics Coronavirus | airlines | Lockdown

Domestic flights resumed on May 25, but airlines are allowed to operate 33 per cent of capacity
In a further sign that the government is in favour of opening up the economy more, the Ministry of Civil Aviation intends to increase the scale of domestic flights to 50 per cent of capacity.

Domestic flights resumed on May 25, but airlines are allowed to operate 33 per cent of capacity.

The ministry has sought suggestions from airlines on whether this is feasible.
However, industry sources said except market leader IndiGo and government-owned Air India, the rest gave weak demand as a deterrent.

They cited passenger worries, complicated by restrictions on the part of states, among the factors that would make it difficult to scale up.

“We feel around 20 days of operations have been handled smoothly and the diligent observance of protocols has proved air travel is safe. The scale of operations can be increased,” said a government official, adding airlines and state governments had been asked to give suggestions.
The official pointed out the data till now proved that air travel was the safest mode of transport due to its controlled access and traceability at departure, transit and arrival.

Less than 1 per cent of the people who flew since May 25 were detected carrying the virus. Also, only when a substantial portion of the domestic routes are functional, overseas flights can resume as international routes depend on traffic feed from domestic flights.

Market leader IndiGo has supported the move and said it is willing to increase flights up to 50 per cent.

“IndiGo is a strong proponent of flying more. The airline has informed the government that it wants to scale up to 50 per cent if permitted,” said an airline executive.

But SpiceJet, GoAir, AirAsia India, and Vistara said demand was not strong enough to operate at 50 per cent on all routes.
Demand, they said, was primarily unidirectional, meaning the aircraft were flying on one route with few passengers.

This paper had reported the data from travel firms showed over 90 per cent of the bookings were for one-way trips and on non-metro routes, indicating little demand for business travel.

The reason why IndiGo is willing to scale up is the company’s healthy cash balance, unlike that of its peers.

A cash balance of Rs 20,376 crore gives IndiGo the cushion to operate flights on one way with a lower load but make money in other directions where it gets full capacity.

“Flights need to be at least 80 per cent full for the airlines to have a chance to break even. Currently we are nowhere near that as there is traffic primarily from metros to the cities in East India, from where a lot of migrant workers come. By ramping up capacity on those routes, IndiGo may not be able to recover the full cost of the trip, but at least recoup the variable cost,” said an airline executive.
Variable costs are those which go up or down depending upon the usage of the aircraft like fuel, landing charges at airports, and crew allowances. Higher the utilisation of the plane lower, better is the chance to recover these costs.

“With fuel costs currently manageable, it makes more sense for an airline with substantial cash to keep as many as planes flying rather than pay high fixed rentals keeping them grounded,” the airline executive said.

However, executives of airlines with weak balance sheet like SpiceJet and GoAir said it will be very difficult for them to scale up unless demand improves. “It will be very difficult to expand unless demand improves. The first step is to ensure this is to streamline quarantine measures of various states,” a SpiceJet executive said.

While SpiceJet is operating around 75 flights, GoAir has scheduled only 35 flights per day.

“Cancellations by these airlines are common as they are trying to preserve cash and are cancelling flights for which 60 per cent seats aren’t sold,” said an executive of an online travel portal.

Airline executives also said state government curfews limit the duty hours of airports where there is demand. “Many airports in East and Northeast like Bagdogra, Imphal, Agartala have watch-hour limitations. Imphal allows only three, while Bagdogra is permitting 10 flights per day. Even if there is demand, I can’t operate more flights,” an Air India executive said.

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