Number Crunch - In crisis, passenger traffic hit more than cargo

The slowdown in 2011-12 seems to confirm fears that the worst is not yet over for domestic airlines.

In times of economic crisis, air passenger traffic undergoes a sharper decline than cargo freight. An analysis of domestic air passenger traffic prior to the 2008 global financial crisis shows that the passenger load factor of scheduled airlines rose consistently from 64.9 per cent in 2004-05 to 68.9 per cent in 2007-08. In tandem, passenger traffic more than doubled during the period. But in 2008-09, the year of the crisis, the PLF declined drastically to 63.7 per cent, with the number of passengers declining by 11.1 per cent.

In the case of cargo, the weight load factor (WLF) rose from 63.9 per cent in 2004-05 to 67.1 per cent in 2005-06 and 2006-07. This was accompanied by an 8.7 per cent increase in volumes. But the WLF subsequently fell to 65.7 per cent as the crisis first began to manifest itself in 2007-08, though volumes still rose by 13.6 per cent. In 2008-09, the weight load factor plummeted further to 59.6 per cent, with the volume of cargo transported by air declining by 8.2 per cent.

Immediate recovery

Passenger and cargo air traffic witnessed an immediate recovery thereafter in the country: The PLF rose to 72 per cent and the WLF to 65.6 per cent in 2009-10, accompanied by a 14.9 per cent increase in passenger numbers and an 18.1 per cent rise in domestic cargo transport. Things improved further in 2010-11, with the PLF and WLF rising to 77.1 per cent and 70.2 per cent, respectively. The volume of traffic also rose by 19.2 per cent in the case of passengers and 17.5 per cent for cargo. Indian airlines are now flying through turbulent times again, with utilisation of seats and cargo capacity witnessing a dip in 2011-12. Domestic air passenger traffic in India rose by 12.6 per cent in 2011-12, but the passenger load factor (PLF) as a percentage of available seats dipped by 2 percentage points to 75.1 per cent.

The cargo weight load factor as a percentage of available capacity also dipped to 67.8 per cent during the year from 70.2 per cent in the previous year, with the total cargo volume dropping by 5.6 per cent. The slowdown in 2011-12 seems to confirm fears that the worst is not yet over for domestic airlines. The reduction in passenger and weight load factors implies that the airlines are operating at sub-optimal capacity, translating into lower efficiency amid burgeoning fuel costs.

Worst performer

A closer look at individual airlines shows that loss-making Air India was the worst-performer among the major domestic scheduled airlines in terms of PLF and WLF in 2011-12, dragging down the overall performance in the sector. In contrast, Indigo, Go Air, Spice Jet and even Kingfisher were able to better the average performance of the sector in terms of PLF and WLF. On the other hand, while Jet Airways and Indian Airlines were above passenger traffic benchmarks, they were below average in terms of WLF. But the performance of most of these airlines was worse than in 2010-11, whereas Air India was able to improve its performance marginally (see table).

http://www.thehindubusinessline.com/features/investment-world/macro-view/article3639828.ece