India

India domestic passenger growth slows to 8% in Dec-2011; 2012 growth to slow from 16.6% in 2011

India’s domestic air passenger growth slowed to 8% in Dec-2011 to less than half the pace of growth experienced in calendar 2011 and down from the 17-22% growth rates seen between Jun-2011 and Oct-2011. While passenger numbers in India’s domestic market have seen growth now for 31 consecutive months, the result for Dec-2011 marks the end of 16 consecutive months of double-digit growth. This single-digit growth in the peak month of Dec-2011 (to 5.63 million passengers) is a sign that slowing economic growth is affecting air travel and reflects impending capacity caution by some of the nation’s largest players.

India’s domestic passenger numbers increased 16.6% to 60.7 million passengers in 2011, averaging out at 5.1 million passengers per month, and up 74% from 2006 levels. The largest stand-alone carrier was IndiGo with a 19.5% market share, with IndiGo also the fastest growing carrier in 2011.

AirAsia X route changes spotlight ownership complexity post MAS deal, but also growth opportunities

Doomsayers will be quick to look at a series of route cancellations from Malaysia-based AirAsia X and proclaim the demise of the modern low-cost long-haul model AirAsia X pioneers. The context for the changes – ending service to London Gatwick, Mumbai, New Delhi and Paris Orly – expands beyond fuel costs, rising taxes in Europe and new visa restrictions in Malaysia. AirAsia X was already struggling in Europe and particularly in India. The recent cross-ownership deal between Malaysia Airlines (MAS) and the AirAsia Group was also clearly a big factor.

That is not to suggest AirAsia X's changes are simply a matter of submission to MAS. The biggest advantage, besides brand awareness, of the high profile London and Paris routes was their ability to put passengers on multiple AirAsia short-haul flights as they travelled around southeast Asia. MAS' deployment of the A380 later this year will lower unit costs to London, narrowing the gap with AirAsia X, currently using more fuel-thirsty A340s. With the AirAsia-MAS partnership, and plans for the two to facilitate passenger transfers, the AirAsia group can still gain feed on its short-haul network while AirAsia X will benefit from redeploying capacity in Asia Pacific and, notably, China.

DGCA Report blunder compounds India’s airline industry problems

In light of the financial difficulties being experienced in the Indian aviation sector, industry regulator, the Directorate General of Civil Aviation (DGCA), recently commissioned an audit of the nation’s carriers to assess whether safety was being compromised. (A similar initiative was undertaken in 2008 at the time of the fuel price spike but nothing emerged from that.) The clumsy handling of the contents of the Dec-2011 report has only served to aggravate an already critical situation for the aviation industry.

Aviation safety-related matters are extremely sensitive, given the public concern – and the resulting commercial impact on airlines. In this case, the findings of the audit should have been handled in one of two ways: (1) If there were areas of concern requiring rectification, but not posing an immediate safety risk, the regulator should have issued private notices to each of the airlines concerned to seek clarifications and to demand a clear, time-bound plan to remedy any shortcomings, with appropriate action should the airline fail to do so; or (2) if the audit findings indicated an imminent risk to public safety the airlines concerned should have been grounded immediately.

Non-stop US-India market continues to shrink with American Airlines ending Chicago-Delhi service

The number of carriers operating direct service between the US and India will decline to two – Air India and United – from 01-Mar-2012 when American Airlines ends its sole service to India, a daily service between Chicago O'Hare-New Delhi. The cancellation of the unprofitable routes comes as American rationalises its network as part of its bankruptcy filing. The carrier stated that the service is being cancelled due to the “historical financial performance of the route and its future outlook given the global economic climate and high oil prices.” The poor financial performance on the route, American's longest at 7484 miles, relates to the impact on yields of competitive pricing as American was able to consistently report high load factors on the route over the past 12 months. 

Robust growth in India domestic market fails to translate into profits

India’s domestic aviation traffic posted double digit growth of 11.1% in Nov-2011 to reach 5.4 million passengers for the month. Growth has slowed from the 17-22% rates seen since Jun-2011, however India remains one of the fastest growing domestic markets in the world, with growth expected to continue despite the current financial challenges experienced by key players in the Indian aviation market.

In the first 11 months of 2011, domestic passenger numbers increased 17.6% to 55.0 million passengers, averaging out at 5 million passengers per month. India’s domestic market has seen passenger growth now for 30 consecutive months, with 15 consecutive months of double-digit growth. Domestic traffic has increased by 85% in the past five years since Nov-2006, with domestic traffic now 41% above Nov-2007 levels, 80% above Nov-2008 levels and 32% above Nov-2009 levels.