April 20, 2017 9:01 pm JST

India air traffic growth at lowest in 17 months as travel demand weakens

MUMBAI (NewsRise) -- Air passenger traffic in India grew at the slowest pace in 17 months in March, as lean travel season damped demand.

The number of passengers flown in March grew 15% on-year to 9.05 million, according to government data. Traffic had expanded 15.8% in February, snapping 13 months of more than 20% growth.

The slowing pace of traffic growth comes after India beat Japan to be the third-largest domestic aviation market in the world last year. India's domestic air passenger traffic stood at 100 million at the end of 2016, compared with 97 million in Japan, according to data from Sydney-based aviation consultancy Center for Asia Pacific Aviation.

Air travel in India boomed in recent years as rising incomes and the advent of no-frills airlines prompted more people to shun trains for long-distance travel. A sharp fall in fuel prices allowed airlines to drop faces.

The passenger load factor in the month of March has fallen slightly, due to the "lean period," according to a statement from the Director General of Civil Aviation. Analysts say the slowdown is also a reflection of carriers withdrawing discounts offered in the wake of the November demonetization.

India had abruptly recalled high-value notes that account for 86% of the currency in circulation to curb illegal wealth, triggering a cash shortage in Asia's third-largest economy. The move had crippled consumer spending, affecting demand for air travel.

"Airlines have pulled off most of the freebies given post the demonetisation to boost demand," said Vishal Rampuria, an aviation analyst at HDFC Securities.

Further, the industry is gradually trying to improve pricing to counter the increase in aviation turbine fuel costs. In the first six months of fiscal year 2017, all airlines were offering last minute fares at throw-away prices to fill empty seats, a practice that has been completely reversed since January, according to analysts.

Between January and March, domestic airlines have carried about 27.28 million passengers, up about 19% from a year earlier, the data showed.

The nation's top airline by market share IndiGo, owned by InterGlobe Aviation, filled 81.6% of its seats in March, compared with 87.7% in February. State-owned Air India too saw its so-called load factor fall to 74.6% from February's 79.8%.

Third-ranked Spicejet filled 91.4% of its seats, while load factors at India's newest carriers Vistara and AirAsia fell to 82.2% and 87.8%.

Despite the weak traffic data, aviation stocks surged in Mumbai trading on Thursday.

Shares of InterGlobe touched their 52-week high, before closing up 6.65%. Smaller rival Spicejet jumped 10.4%, while Jet Airways gained 6.50%. The benchmark S&P BSE Sensex added 0.29% .

Analysts say the investor sentiment is driven by the expectation of robust passenger traffic in the current quarter.

"The April-June period is a peak travel season as schools close for holidays," said Aditya Jaiswal, an equity analyst at Kolkata-based brokerage Stewart & Mackertich. "Domestic airlines are expected to witness strong passenger traffic during this period."

The recent fall in crude oil prices and strengthening of the Indian rupee against the U.S. dollar also helped boost investor optimism about aviation stocks, Jaiswal said.

The country's aviation industry is barely turning around after making losses for almost a decade. In the fiscal year that ended in March 2016, Indian carriers reported a combined profit of $122 million, the first in a decade, according to CAPA.

--Dhanya Ann Thoppil

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