Grounding of Jet Airways Has Resulted in Low Passenger Load Factor: ICRA

The increase in the airfare will benefit the profitability of the airlines, but the passenger load factor will continue to suffer, ICRA pointed out.

By May 25th, 2019 AT 6:06 PM
Highlights:
  • Government is taking steps to regain the demand-supply balance.
  • Hinduja Group may invest INR 1000-1500 crores in Jet Airways.
  • Hinduja Group may partner with Etihad Airways, State Bank of India and London-based AdiGro in the investment.

According to Information and Credit Rating Agency of India Limited (ICRA), India’s aviation industry has witnessed a drop of 4.2% in domestic air traffic to 10.99 million in April. ICRA attributed the grounding of Jet Airways last month for this de-growth.

The closure of operations of Jet Airways also adversely affected the capacity of the country’s aviation industry as much as about 14%. Subsequently, the airfares increased 30-40% in March compared to September 2018. The demand-supply imbalance impacted the passenger load factors (PLFs) of the airlines in April. GoAir is the only airline that reported a stable PLF in April.

Jet-airways

The discontinuation of operations by Jet Airways has impacted about 14% of the total industry capacity. Overall, the moderation in capacity starting February has resulted in airfares surging by about 30-40% in March over September last year, Kinjal Shah, vice president and co-head for corporate sector ratings at ICRA said.

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Government has adopted steps to regain the balance by allotting the time and aircraft of Jet Airways to other airlines. The action has moderated the airfares, but the overall situation remains the same. The increase in the airfare will benefit the profitability of the airlines, but the passenger load factor will continue to suffer, ICRA pointed out.

Hinduja Group may revive Jet Airways by investing INR 1000-1500 crores

Jet Airways discontinued its operation on April 17. Although there is no much information about the revival of the cash-strapped airline, there are reports about Hinduja Group investing INR 1000-1500 crores in Jet Airways. Hinduja Group may partner with Etihad Airways, State Bank of India and London-based AdiGro in the investment. Together, they may create a consortium.

According to a report by Hindu BusinessLine, a meeting was held at the headquarters of Etihad Airways on Abu Dhabi, between the representatives of the four companies to discuss the details. As per the plan discussed, Etihad will have 24% of the stake, SBI will have a 20% share, and Hinduja could acquire 20-25%. Adigro will bring INR 2500 crore of equity.

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Ria is a lead news writer at Aviation Scoop. She writes from dawn to dusk, reads in the evenings, and draws at some ungodly hours. She loathes human interaction, and finds solace in the sweet, musky smell of old books, and rain. Find her on Twitter here - @rialakshman.

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