MUMBAI (NewsRise) -- Airline passenger traffic in India grew at the slowest pace in at least five years in February as the grounding of aircraft by carriers and rising fares crimped demand.
The number of passengers flown last month rose 5.6% on- year, the slowest pace of expansion since June 2014, to 11.34 million, according to government data.
The slowdown comes as India's second largest full-service airline Jet Airways (India) struggles to survive amid a financial distress. According to government data, Mumbai-based Jet Airways is operating barely a third of its 119 planes as it failed to pay its employees, suppliers, and lessors due to a cash shortage. Passenger traffic at Jet Airways was down 28% last month, while its market share shrank 220 basis points to 11.4%.
India's state-backed lenders are cobbling together a rescue package to bail out the airline and induct a new investor on board as Prime Minister Narendra Modi's government is keen to avoid thousands of job losses ahead of federal elections scheduled in April and May.
The sector has also been marred by a shortage of skilled pilots. Top Indian airline IndiGo, owned by InterGlobe Aviation, canceled dozens of flights every day last month. Still, the troubles at Jet Airways proved a saving grace for the carrier, which saw its market share expand about 1% to 43.4% last month.
India's air travel had been growing at an annual pace of more than 20% in the past few years on the back of rising incomes and the advent of no-frills carriers. The South Asian nation is already the largest aviation market after the U.S. and China with domestic traffic of more than 100 million passengers.
Total domestic capacity in terms of the number of seats available was up only 8% in February. This capacity tightening has caused fares to rise significantly, HSBC said in a report on Friday. The shortage of planes and high seat occupancies are expected to push airfares higher in the short term, it said.
Airfares in India rose 15% from the beginning of the year, travel company Yatra.com said last week.
Between January and February, domestic airlines have carried about 23.86 million passengers, up 7.4% from a year earlier, the data showed.
Meanwhile, the capacity constraints are likely to worsen in March as the government decided to bar Boeing 737 MAX aircraft from flying in Indian skies amid safety concerns. The government's decision came after two-thirds of the 737 MAX aircraft were grounded globally, following the fatal crash of a similar plane in Ethiopia earlier this month.
Indian airlines will also not take deliveries of the aircraft until the safety concerns are cleared, the government said. The move dealt a blow to Indian budget airline SpiceJet, which had to ground 12 of its aircraft. Jet Airways, which is the only other Indian airline to use this type of aircraft, already grounded all of those planes. The two airlines also have about 400 737 MAX on order.
Shares of IndiGo edged 0.3% higher in Mumbai trading on Friday, while that of Jet Airways rose 3.6%. SpiceJet gained 7% while the benchmark S&P BSE Sensex lost 0.6%.
--Dhanya Ann Thoppil