August 29, 2017 TnH Global

India domestic air traffic growth likely to slow in 2017 as per IATA

Airlines to clock a domestic growth in low double digits in 2017 compared with about 20% in 2016, says IATA’s chief economist Brian Pearce

India’s airlines are likely to see slower growth this year because of fuel price increases and a marginal slowdown in the economy, according to the International Air Transport Association (IATA).

“You would expect it to slow because the economy has slowed—not very much—and we are getting towards the end of big stimulus from the fall in oil prices,” IATA chief economist Brian Pearce said in a interview. Pearce said he expects the airlines to clock a domestic growth in low double digits this year compared with about 20% last year when it touched almost 100 million in annual passengers flown.

“We are not getting a price stimulus from oil. We had a big stimulus from oil in 2016 much less in 2017,” he said, adding that Indian airlines increased capacity by about 14% in the last 12 months and that process will continue. Pearce said oil prices will remain around $50 this year but could go up next year.

“Fuel prices will remain sideways. Earlier it looked like Opec cuts would lead to prices rising but US shale oil producers have balanced that out. Perhaps next year you would see pressure on it,” he said.

Some metro airports continue to have issues in India as capacity is increasing, Pearce said. There was also a difference in how China and India were growing, he said.

“The difference between how China and India is growing is that in China they are connecting different city pairs while in India, the expansion has been by increasing frequencies,” he added.

Overall, IATA expects India to displace the UK as the third-largest aviation market by 2026. Ten years after that, India’s air passenger traffic will grow to 442 million by 2035, an increase of 322 million passengers from the current numbers, it estimates. According to IATA, the five fastest-growing markets in terms of additional passengers per year over the forecast period would be China, the US, India, Indonesia and Vietnam.

“China will displace the US as the world’s largest aviation market (defined by traffic to, from and within the country) around 2029. India will displace the UK for the third place in 2026, while Indonesia enters the top ten at the expense of Italy,” IATA had said in its forecast last year.

“Growth will also increasingly be driven within developing markets. Over the past decade the developing world’s share of total passenger traffic has risen from 24% to nearly 40%, and this trend is set to continue,” IATA said.

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