Airlines Finally Allowed to Operate at 100% of Capacity

Airlines Finally Allowed to Operate at 100% of Capacity

by 5paisa Research Team Last Updated: Dec 10, 2022 - 12:35 pm 49.8k Views
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After a gap of almost 17 months, airlines were allowed to operate flights at 100% of pre-COVID capacity. That effectively means all restrictions on flying have been lifted. The Ministry of Civil Aviation has not yet removed the caps on fares that it had announced. The 100% capacity flying will be effective from 18th October.

In May 2020, due to the airlines being a contact-intensive business, the flying capacity was cut to 33%. Between May 2020 and December 2020, the capacity was gradually increased to 80%, where it stayed till June 2021. In Jun-21, due to COVID 2.0, the capacity was again cut to 50% and had been scaling up gradually. Last month it was raised from 72.5% to 85%.

Check - Ministry of Civil Aviation allows Airline Companies to Fly with 85% Capacity

There were two reasons for the restoration of 100% flying capacity in India. Firstly, the vaccinations had crossed 95 crore and the incidence of COVID or its variants had substantially come down. Secondly, the government wanted to ensure enough flying capacity available to travellers during the prolonged festival season in India.

The results of higher capacity permission is already visible in the numbers. For the first seven days of October, a total of 17 lakh passengers took domestic flights in India. That is 10% higher compared to the first 7 days of September. Currently, airlines are operating at 70-75% capacity while passengers are at 60-70% of pre-pandemic levels.

India’s largest airline, Indigo Airlines with domestic market share of 55%, as it operates nearly 1200 flights a day and can restore peak capacity. Its average PLF (passenger load factor) is in the range of 75-80% and the restoration of capacity will give a further boost to the numbers and to the PLF of Indigo. This will apply to other airlines too.

Indian airline companies have been stuck between the devil and the deep sea for some time now. ATF prices are rising and low PLF has meant that the gap between the CASK and the RASK has been dipping deeper into negative zone. While ATF prices are not in their control, flying at full capacity will enable better absorption of fixed costs.

Apart from the market leader, Indigo Airways, this announcement is also likely to be positive for the Tatas who have just acquired Air India. It also may be good tidings for Rakesh Jhunjhunwala, whose Akasa Air will take off next year.

Read - Rakesh Jhunjhunwala's Akasa Air Gets Approval to Launch Operations

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