MUMBAI (News Rise) -- Airline passenger traffic in India barely grew in March as the nation's second-largest full-service carrier Jet Airways (India) grounded several aircraft after it ran out of cash.
The number of passengers flown last month rose 0.1% on-year to about 11.6 million, according to government data.
Jet Airways, on the brink of bankruptcy, last week said it is temporarily suspending its operations after banks refused to provide emergency funding. The Mumbai-based carrier is saddled with more than $1 billion in debt and has failed to pay its employees, suppliers, and lessors due to the cash shortage. Before it halted flights, the company was barely operating 15% of its fleet of 119 planes, triggering a surge in airfares.
Last month, Jet's lenders led by the State Bank of India wrested control of the company from its founder and chairman Naresh Goyal, who cut down his stake and stepped down from its board. Banks are currently offering a 75% stake in the carrier as part of their debt restructuring efforts.
According to local media reports, six prospective buyers have submitted expressions of interest to buy the airline's stake.
Jet Airways' market share more than halved to 4.6% in March, while passenger numbers slumped 53%. The troubles at Jet Airways benefitted rival IndiGo, which saw its market share expand about eight percentage points to 47% last month.
To alleviate the concerns of passengers after Jet Airways' debacle, the government has asked other airlines to induct more than 30 planes through July. On Tuesday, the civil aviation ministry said the government has set up a committee to re-allot the flight slots of Jet to other airlines on a temporary basis for three months.
According to brokerage Edelweiss, the yields-a proxy for airfares-are likely to have surged more than 15% in January-March.
The government move has reportedly raised concerns among investors who fear a further loss of Jet Airways' value when the sale process is underway. More than 400 lucrative flight slots at the Delhi and Mumbai airports are being allocated to other airlines, the Economic Times reported Tuesday, citing sources it didn't identify.
The government, in its statement, reassured investors, saying Jet Airways' slots would be protected and made available to the carrier as and when it revives operations.
The grounding of Jet Airways' aircraft came at a time when the sector was already reeling under a capacity crunch after the government decided to bar Boeing 737 MAX aircraft from flying in Indian skies amid safety concerns. The move came after two-thirds of the 737 MAX aircraft were grounded globally, following a recent fatal crash of a similar plane in Ethiopia.
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 aircraft, already grounded all of those planes. The two airlines also have about 400 737 MAX on order.
SpiceJet saw a marginal decline in market share to 13.6% in March from 13.7% in the previous 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.
Between January and March, domestic airlines have carried about 35.5 million passengers, up 5% from a year earlier, the data showed.
Shares of IndiGo lost 1.1% in Mumbai trading on Tuesday, while that of Jet Airways rose 9.4%. SpiceJet gained 1.1% while the benchmark S&P BSE Sensex lost 0.2%.
--Dhanya Ann Thoppil