Smaller airlines unlikely to claw back lost market share as COVID-19 hits passenger traffic

Currently, the immigration clearance process takes about 1.5 to 2 minutes on an average for a passenger at counters staffed by immigration officials at Delhi’s IGI airport. (File image: PTI)

SpiceJet, GoFirst, Vistara and Air Asia are unlikely to regain lost market share in India in the next two to three quarters as IndiGo continues to dominate a sector that’s been ravaged by restrictions to control the spread of COVID-19, experts and analysts said.

“The dominance of IndiGo continues and they are aggressive in terms of their future plans as well. This is impacting the working of other airlines,” said Jagannarayan Padmanabhan, director and practice lead, transport and logistics, at CRISIL Infrastructure Advisory. “IndiGo maintaining a market share of around 55 percent is a given for the next two to three quarters.”

Caps on capacity utilisation and various other restrictions to control the spread of the pandemic have resulted in the four airlines burning more cash than IndiGo, Jagannarayan said.

The civil aviation ministry has set the cap on capacity utilisation at 50 percent of pre-COVID levels from 80 percent at the end of May and has increased the floor price on fares. However, if the number of air passengers does not pick up soon, these four airlines will continue struggling to regain market share and sustain operations.

The number of air passengers plunged in May as daily COVID-19 cases climbed to a peak during the second wave of infections.

“Domestic air passenger traffic is likely to remain low for the coming few quarters and this will continue to impact the ability of smaller airlines to claw back market share without putting a dent on their balance sheets,” an analyst from a rating agency said.

The possibility of a third wave of COVID-19 cases in the country will likely keep passenger traffic in the slow lane in the coming quarters.

SpiceJet Ltd, GoFirst, Vistara and Air Asia each reported a drop in market share in May as domestic passenger air traffic fell for the second month in a row in the wake of the second wave of the pandemic.

SpiceJet’s market share in May narrowed to 9.4 percent from 12.8 percent in March. GoFirst’s share shrank to 6.5 percent in May from 7.8 percent, AirAsia India’s share declined to 3 percent from 6.9 percent and Vistara was at 4.6% from 6.4 percent in March.

The fall in the market share of these four airlines was mainly because the bigger airlines, mainly IndiGo, are more financially capable, experts said.

While IndiGo was able to operate 70 to 80 percent of its pre-COVID flight capacity, the others are forced to lower theirs to reduce cash burn. IndiGo’s market share widened to 55.3 percent in May from 53.5 percent in March.

The smaller airlines were forced to cancel flights on less-used routes in the past two months and to reduce the frequency of flights on busier routes, experts and analysts said.

Domestic passenger traffic fell to 21.15 lakh passengers in May from 57.3 lakh passengers in April and 78.2 lakh passengers in March.

A market expert told Moneycontrol that the daily cash burn was about Rs 16 crore for SpiceJet, Rs 13.5 crore for Air India, Rs 6 crore for GoAir and Rs 2.6 crore for Vistara.

Most airlines in India face a cash crunch and jet fuel prices are also climbing, having risen about 3% on June 16.

Vistara and AirAsia India are banking on their promoters to continue operations. GoFirst plans an initial public offer to raise funds to sustain operations.