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

Ministry of Civil Aviation

Indian Market
by 5paisa Research Team Last Updated: 2022-08-08T18:47:52+05:30

On Saturday, 18th September, the Ministry of Civil Aviation allowed domestic carriers to operate flights at 85% of pre-COVID levels. This was 50% in June, 65% in July, 72.5% in August and has now been increased to 85%. In a way, this is almost a reversal back to the December 2020 levels.

Last year, in the face of COVID-19, the Civil Aviation Ministry had cut down flying ratio substantially but had gradually raised it to 80% by December 2020. It stayed at 80% till May-21 but was subsequently dropped to 50% in Jun-21 due to the onset of COVID 2.0. This increase in flying capacity to 85% will help flights to inch back to normalcy.

For airline companies, this comes as a major boost to their operating performance. In the airline industry, every empty seat and every idle aircraft entails a huge cost. That is because, huge fixed costs in the form of lease rentals, airport charges, maintenance costs and manpower costs continue as usual. Hence, the trick lies in improved capacity utilization.

The passenger load factor (PLF) had touched 70% in Aug-21 with 34% yoy increase in flyers. That PLF is now likely to increase further with the capacity allowed at 85%. The PLF is a key factor that impacts the RASK-CASK spread. The revenue per average seat kilometre (RASK) is currently below the cost per average seat kilometre (CASK) for all the major airlines in India, which explains the huge losses. Higher PLF will reduce that burden.

Both the listed airlines; Interglobe (Indigo) and SpiceJet stand to gain from this move. Of course, Indigo is a decisive leader with 58% market share, so it is an obvious beneficiary. SpiceJet will be able to gain market share, as it benefits from its fleet of Boeing 737-Max back in the skies.

In a related announcement, the Civil Aviation Ministry also revised the timelines for fare bands on airline ticket prices to 15 days from 30 days currently.

Read more:- DGCA lifts ban on Boeing 737 Max Aircraft

Start Investing in 5 mins*

Get Benefits worth 2100* | Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account

& get benefits worth 2100*

Resend OTP
Please Enter OTP
  • Have Promo code?
  • Use code ACT2100
Enter Promo code
Account belongs to

By proceeding, you agree to the T&C.

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number