Year Ender 2021: Growth in domestic traffic, slew of new developments bring hope to aviation sector

An increased pace of vaccination and rising demand for air travel, contributed by the leisure segment, led to air traffic recovering substantially to reach 82 per cent of the pre-Covid-19 levels during the month of November, igniting hopes for a better 2022.

Passengers carried by domestic airlines during January-November 2021 stood at 7.26 crore as compared with 5.56 crore during the corresponding period of the previous year. This translates into an annual growth of 30.40 per cent and monthly growth of 65.50 per cent, according to data from aviation regulator, Directorate General of Civil Aviation (DGCA).

"Load factors seen during the current holiday season is further evidence of the optimism that travellers have exuded in air travel. The news on the Omicron variant continues to be of concern for many countries including India but that hasn't yet significantly impacted the travel demand," said S Vasudevan, partner and global airports lead, aerospace & defence at KPMG.

"When news of Omicron came across the media, there was a small fall in our bookings. But we are very confident that has dropped off now and we are back to pretty much where we were," William Boulter, the chief commercial officer at the country's largest passenger airline IndiGo, told BusinessToday.In earlier this month.

Notwithstanding the anticipated third wave of the coronavirus pandemic, Amod Khanorkar, senior director at CAREEdge Ratings (formerly Care Ratings), expects the domestic passenger traffic to touch pre-COVID levels towards the end of the July-August quarter in financial year 2022-23. He, however, cautioned that recovery in international air traffic might take a while.

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"Continued international air travel bubble agreements and the recent outbreak of Omicron variant are expected to delay the recovery in international passenger traffic beyond FY2022-23," warned Khanorkar.

Series of noteworthy developments

For the Indian aviation sector, the year was also made memorable by a series of new developments.

"The sector had to take the impact on its chin to record sector level losses but that hasn't deterred the launch of a new airline, Akasa, and also the bid for Jet airways. The year also saw the biggest fillip to the government in terms of privatisation of Air India," remarked Jagannarayan Padmanabhan, practice leader and director, transport and logistics at CRISIL Infrastructure Advisory.

Backed by stock market bull Rakesh Jhunjhunwala, low-cost airline Akasa Air is expected to take off in the summer of 2022.

Padmanabhan said it would take at least a couple of more quarters before normalcy is restored in the domestic air travel market.

It was particularly the sale of Air India to Tata Sons that was one of the biggest corporate stories to come out of the Asia-Pacific region during the year.

In his new year message for the employees, Tata Sons Chairman Natarajan Chandrasekaran said, "Our most important milestone this year culminated in our bid to win Air India. It is indeed a historic moment."

The handover of the airline to the Tata Group that was scheduled for this month will now happen in January due to certain regulatory approvals getting delayed.

It also appears that the process of strategic sale of Pawan Hans would finally be concluded in 2022 after two previous failed attempts to offload the government's stake in the helicopter services company.

In another notable development, the year witnessed the announcement of a new policy to regulate the use and operation of drones in the country. Under the revised guidelines, the number of permits and fees, as well as technical requirements, were significantly relaxed to facilitate the segment's growth.

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It is now learned that a meeting between the officials of the ministries of home, civil aviation and the NITI Aayog is scheduled in the first week of January to further refine the policy.

Growth in cargo traffic

In other good news, air cargo volumes continued to rise steadily through the year.

"The air freight business has done even better and that is good news for the industry because it is a reflection of the significant potential for manufacturing, trade and tourism and the role that India can play as a key air cargo hub in the global logistics business," remarked KPMG's Vasudevan.

In August, a 29 per cent year-on-year growth in cargo shipments was registered at Indian airports, according to the Airports Authority of India (AAI).

In the coming year, Indian carriers' revenue performance will be determined by factors such as capacity utilisation and fuel price movement. "Lower capacity utilisation by carriers and steep increase in aviation turbine fuel (ATF) are the major cash burn factors for the players," said Khanorkar.

A lot will, of course, also depend on how the COVID-19 situation eventually pans out.

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