Government announced suspension of majority of travel visas into the country as a step to restrict the spread of coronavirus, resulting in massive ticket discounting in an already slumping air travel market.
Although, SpiceJet Ltd launched a sale where they offered tickets for as low as USD 13 for one way, including free meals, shares of airline SpiceJet Ltd was down by nearly 19 per cent on Thursday morning.
IndiGo also experienced decline in its shares of as much as 17 per cent on Wednesday evening due to a sharp decline in domestic bookings.
Lately on Wednesday India, announced that it would suspend vast majority of visas to the country in a wide-reaching attempt to prevent the spread of coronavirus as cases across the region continued to rise.
“The bigger the airline, the bigger the risk and loss because cancellations will be higher,” said Nripendra Bahadur Singh, industry principal, aerospace, defence and security practice at Frost & Sullivan. With the domestic market already saturated, planes will likely remain on the ground racking up increased fixed costs, he said.
Due to busy summer travel period from April to June the move to restrict visas comes ahead, it is also expected to hamper the government’s attempts to sell Air India, which is the only carrier flying long-haul international routes.
“Though the bulk of revenue for airlines like IndiGo, SpiceJet, and premium carrier Vistara still comes from domestic routes, their international exposure has been rising over the last year as they rushed to fill a gap in the market following the collapse of Jet Airways Ltd,” he said.
International business makes up about25 per cent of IndiGo’s total capacity and revenues with a fleet of over 250 Airbus, and SE narrow body aircraft. Flight to China and Hong Kong has already been suspended. Frequencies to Vietnam has been reduced and been forced to halt services to Qatar and Kuwait.
“It has redeployed part of its international capacity on domestic routes but may still be forced to park a handful of planes as domestic travel demand weakens,” said one person with knowledge of the situation. The person declined to be identified because of the sensitivity of the matter.
“IndiGo’s domestic passenger growth is expected to decline by 6% in the April-June quarter against an industry-wide fall of 5% for the same period, while the airline’s international passenger traffic is expected to dip by 7%, brokerage Centrum estimates,” he said.
Magazine
