Business

Airlines cautiously optimistic

‘Filling even 33% capacity will be difficult once flights begin’

Airline companies gearing up to resume domestic operations after two months on Monday (May 25) remain only ‘cautiously’ optimistic.

Most airlines, except Vistara, refrained from commenting on the record on the government’s announcement on reopening the skies for passenger flights, that too with limited operations and with capped fares to protect air passengers from high charges.

“It was [supposed] to open one day and we are happy that it is opening now. We are ready to restart. But demand is the main concern. Only those who are stranded will book. Is that enough to fill the seats and cover the costs?” asked a private airline executive not wanting to be named. His airline declined to comment officially.

“Leisure travel is not going to happen, corporate travel is unlikely to take off and considering the current scenario, it will be difficult to even fill the 33% capacity that is allowed,” he said.

Airlines are expected to cancel flights which will have very less load — say 30 to 40 seats in some sectors.

Airline officials said the capping of fares was not in their favour as they cannot recover any part of their losses they had incurred due to stoppage of scheduled operations for two months.

“Now there is no option. We could have charged more. And fares could have gone below the lowest slab also on account of low demand. We have to wait and see,” an executive said.

Commenting on the development, Leslie Thng, CEO, Vistara said, “Aviation is a growth engine for the economy and resumption of air travel will give great impetus to the government’s overall efforts in helping the country eventually return to normalcy.”

“We thank the government for taking this step and for their consultative approach in bringing about the new SOPs/guidelines for all stakeholders in the aviation sector,” he said.

An Air India spokesperson said, “We would be glad to serve our passengers by operating scheduled flights adhering to all government guidelines and protocols.”

An airline executive, on the condition of anonymity said, “If intrinsic demand is muted, then the minimum fare will help in general. Maximum fare will not be that relevant.”

“However, when demand is muted and minimum fare is higher than what it would otherwise have been, the weakest or least attractive player suffers the most as they cannot use pricing as a tool to increase share,” he added.

“Setting a cap will create shortages like we see for trains. That is why typically leaving fares to be determined by the market is the best method,” he said.

(With inputs from Jagriti Chandra in New Delhi)

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Printable version | Jun 1, 2020 2:24:16 PM | https://www.thehindu.com/business/airlines-cautiously-optimistic/article31644320.ece

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