According to HSBC Global Research, there are chances that the entry of two new airlines – Akasa and Jet Airways 2.0 – could disrupt the Indian domestic airlines. The two airlines could bring in recent battles on pricing standards and excess supply issues in the Indian aviation market.
In a report titled ‘Indian Aviation, 2022: A Year of Two Halves,’ HSBC Global Research said that India’s aviation sector would recover passenger demand by April-June 2022. However, the happiness of the recovery could be short-lived as two new airlines will start their commercial operations from July 2022.
When there is excess supply, it is natural for any market to have a price war between the service providers. With the launch of Akasa and Jet Airways 2.0, HSBS estimated the addition of nearky 80 to 85 aircraft in India's domestic market in 2022, which could increase the gap between demand and supply, creating pressure on the load factor and yield.
According to industry experts, the budget aircraft operators IndiGo and SpiceJet may report a heavy loss for the quarter ended in December. IndiGo is expected to announce a heavy loss of Rs 310 crores and SpiceJet is expected to report losses of nearly Rs 170 crore during the December 2021 quarter.
Indian airlines will recover from pandemic impact soon, says HSBC aviation report
The HSBC has assumed the recovery of the Indian aviation sector from pandemic by keeping the markets like Europe and Africa as the benchmark, which recorded peak spike of COVID-19 cases for a shorter period of time, but created milder impact than the previous waves. HSBC expects the same scenario to repeat in India, which would prompt a quick recovery for Indian airlines.
“Although demand in both the previous COVID-19 waves took around 8-9 months to get back to about 80% of pre-Covid-19 levels, the peak levels of infections in the UK and South Africa this time were acute and brief, but with a very mild impact, so the mood regarding travel is still fairly optimistic in Europe,” a statement from HSBC report said.
Similar to many other reports, HSBC Global Research also concluded that the recovery of international passenger demand could take much longer. Several countries, especially the ones including major economies, continue to implement travel restrictions to contain the spread of the COVID-19.