Festive Surge to Ease Dip in India's Domestic Air Passenger Traffic
Festive demand may ease the decline in India's domestic air passenger traffic this October, according to a new report by Jefferies.
After a challenging few months for the aviation sector, India's domestic air passenger traffic is showing signs of a turnaround this October. According to a recent equity research report by Jefferies, the steep decline in passenger numbers is expected to moderate, with the year-on-year drop narrowing to approximately 4–5 per cent.
This projected improvement is being driven by a combination of two key factors: the surge in travel demand during the festive season and airlines actively restoring their flight capacities.
Breaking the Four-Month Slump
The potential recovery comes as a relief after four consecutive months of dwindling passenger numbers. The data reveals a stark contrast between the recent quarter and the current trend:
- Second Quarter Performance: Departure passenger traffic saw a 6 per cent year-on-year decline.
- October Outlook: Month-to-date figures indicate a narrower estimated decline of 4-5 per cent, while showing growth on a month-on-month basis.
Jefferies noted that this pattern mirrors last year's trends. In 2024, traffic rebounded to positive year-on-year growth during October and November following a slump between July and September, although it dipped again in December due to scheduling crises faced by IndiGo.
Major Carriers Feel the Pinch
The road to recovery follows a period of significant weakness during the July-September quarter, where capacity reductions by airlines contributed to a 6 per cent overall drop in traffic. The impact was felt across the industry's biggest players:
- IndiGo: Experienced a 5 per cent year-on-year decline in domestic passenger traffic in September.
- Air India: Saw a sharper decline of 9 per cent during the same period.
The struggle wasn't limited to domestic routes; international passenger traffic carried by Indian airlines also faced pressure, plummeting by 11 per cent in September.
The Fuel Crisis: A Looming Threat
Despite the optimistic festive outlook, the aviation industry is grappling with a severe external threat: the rising cost of Aviation Turbine Fuel (ATF). Geopolitical instability in West Asia has sent global jet fuel spot prices soaring, currently sitting 17 per cent above the average recorded during the July-September quarter.
"The West Asia conflict continues to drive jet fuel prices higher," the Jefferies report highlighted.
Profitability Under Pressure
The brokerage warned that the interplay of high fuel costs and lower aircraft utilization could severely dampen airline profitability, even if passenger yields improve. For the market leader, IndiGo, the combination of fuel inflation and geopolitical uncertainty is making capacity and pricing decisions increasingly complex.
The report concludes that while the October estimates provide a glimmer of hope, a sustained recovery for the sector remains heavily dependent on the easing of geopolitical tensions in West Asia to curb the rising cost of operations.