Indian airlines’ fuel consumption grew at its slowest in 11 months in November, suggesting passenger growth slowed in the world’s fastest-growing aviation market during the festival month.
Demand for aviation turbine fuel from carriers rose 5 percent on a yearly basis for the month, the lowest since December last year, according to data by the Oil Ministry’s Petroleum Planning & Analysis Cell. And airliners’ pace of burning fuel slowed despite a lower base since Diwali holiday travel fell in October last year.
The Diwali month usually sees a spike in air travel. Signs of a slower passenger growth during the holiday period this year would be a concern when airlines expected to benefit from falling oil prices. Airlines struggled for most part of the year as crude surged, the rupee weakened and competition curtailed their ability to increase fares.
All carriers were hurt as fuel contributes more than a third of an airline’s costs. Jet Airways (India) Ltd reported a loss in excess of Rs 1,000 crore, while IndiGo reported its first loss since listing in the quarter ended September.
Passenger growth in November could be muted, agreed Ashish Shah, aviation analyst with IDFC Securities.
Fares in November were also higher by Rs 1,500-2,000 on average compared with the September quarter, another analyst said without willing to be identified as he is not authorised to share data. That may have hurt traffic growth, the analyst said.
Hetal Gandhi, director at CRISIL Research, blamed slower rise in fuel consumption on financial constraints of airlines. Still, she said year-on-year growth will be marginally higher than October’s 13 percent—the slowest pace of passenger traffic growth in 15 months.
There could be another reason for a possible decline in passenger traffic growth.
India on an average saw a 20-percent-plus passenger growth at least in the last three years and this could come down to around 15 percent, Shah said. One of the primary reasons could be capacity constraints at metro airports, he said.
Such a slowdown would hurt airlines that have placed large aircraft orders. InterGlobe Aviation Ltd, parent of India’s largest airline company IndiGo, will be doing the bulk of this addition. The company expects to grow its capacity by 30 percent in financial year 2019 and has placed a firm order for 400-plus aircraft with Airbus.
(This story was originally published on BloombergQuint)
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