As India’s second wave continues to decimate passenger traffic, the government has slashed domestic capacity limits. Airlines will now only be allowed to operate 50% of their summer schedules from June 1st, down from 80%. This has been done to ensure that financially struggling carriers can survive the crisis.
According to Business Standard, the government has officially notified carriers of the capacity changes. Airlines will only be allowed to fly 50% of their domestic summer schedule from June 1st, slashing capacity from 80%. This is a stunning reversal for the aviation sector, which was once set for a full recovery by the summer.
The decision has been made to protect financially vulnerable airlines, which could go bankrupt due to the crisis. This is because some airlines have been struggling to reach anything close to 80% capacity, causing them to lose business. Instead of support airlines individually, the government has opted to shrink total flights instead.
However, the decision was by no means unanimous. The four major carriers were split on whether to reduce or maintain scheduled capacity. Market leader IndiGo and Vistara were both in favor of remaining at 80% capacity, while SpiceJet and GoAir wanted to see far fewer flights. It seems the latter group has won this debate, with passengers left with a narrower choice in the short term future.
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For Indian aviation, the domestic flight reductions will be a step back for the industry. In early 2021, airlines were hoping to reach 100% capacity by the summer, allowing government caps to be removed once and for all. However, the second wave has shown that the industry is a long way from a full recovery and must rebuild one more time.
While the government has not provided much direct stimulus to airlines, it has decided to take control of the market. By setting minimum and maximum fares along with capacity, it can choose to protect weak airlines and prevent consolidation. However, this will also set back connectivity and options for passengers.
Many have said that the government’s repeated intervention impacts the free market nature of the industry. By controlling domestic and international flights, airlines will struggle to bounce back, not allowing them to deploy capacity where demand rises. However, seeing an airline go bankrupt is desperately not want the government wants right now.
Fares going up too
However, it’s not only domestic capacity that has been cut, fares are going up as well. The government has increased minimum fares by 13-15% across flights in a bid to boost airline financials. However, this will mean passengers will have fewer flight choices and higher fares to choose from when they start flying again. For now, it seems Indian aviation’s long road to recovery just got longer.
What do you think about the government’s decision to cut capacity? Let us know in the comments.