Taking A Dive

Taking A Dive

With airlines focusing on profits, the ballistic growth in air travel has started tapering off.

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Manu Kaushik
  • Sep 2, 2017,
  • Updated Sep 6, 2017 11:52 AM IST

The stratospheric rise in the number of people travelling on scheduled commercial airlines during the past two years has started to taper off. Domestic passenger traffic growth has slowed to below 20 per cent for the past five consecutive months over the corresponding months last year. For instance, in July this year, annual growth in passenger traffic stood at 17.18 per cent. In comparison, for 17 of the 24 months of 2015 and 2016, growth was above 20 per cent, reaching a peak of 29.31 per cent in July 2015.

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No doubt growth continues with the number of passengers flying in recent months higher than in any given month in 2014, 2015 or 2016. But the slowdown in the rate of growth is a cause of concern. Globally, the aviation sector is known to grow at two to three times a country's GDP growth. In India, passenger growth over the past two years was higher than that. For instance, GDP growth in 2016/17 stood at 7.1 per cent, whereas passenger traffic growth was 23.18 per cent. That kind of growth is not sustainable over a long period and the current dip shows that it is now adjusting to the GDP figures. It is expected that the growth will come down to low-to-mid double-digit levels.

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Besides headwinds like demonetisation and implementation of the Goods and Services (GST), and a high degree of uncertainty in the domestic economy, the high base effect has played a major role in lowering growth rates. For instance, domestic passenger traffic in July stood at 9.56 million, which is almost double the traffic three years ago - 5.21 million in July 2014. Domestic passenger traffic constitutes around 80 per cent of the total traffic. The two years of stupendous growth has led to total passenger traffic reaching almost 10 million a month. Room to grow on such a high base is limited.

The stratospheric rise in the number of people travelling on scheduled commercial airlines during the past two years has started to taper off. Domestic passenger traffic growth has slowed to below 20 per cent for the past five consecutive months over the corresponding months last year. For instance, in July this year, annual growth in passenger traffic stood at 17.18 per cent. In comparison, for 17 of the 24 months of 2015 and 2016, growth was above 20 per cent, reaching a peak of 29.31 per cent in July 2015.

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No doubt growth continues with the number of passengers flying in recent months higher than in any given month in 2014, 2015 or 2016. But the slowdown in the rate of growth is a cause of concern. Globally, the aviation sector is known to grow at two to three times a country's GDP growth. In India, passenger growth over the past two years was higher than that. For instance, GDP growth in 2016/17 stood at 7.1 per cent, whereas passenger traffic growth was 23.18 per cent. That kind of growth is not sustainable over a long period and the current dip shows that it is now adjusting to the GDP figures. It is expected that the growth will come down to low-to-mid double-digit levels.

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Besides headwinds like demonetisation and implementation of the Goods and Services (GST), and a high degree of uncertainty in the domestic economy, the high base effect has played a major role in lowering growth rates. For instance, domestic passenger traffic in July stood at 9.56 million, which is almost double the traffic three years ago - 5.21 million in July 2014. Domestic passenger traffic constitutes around 80 per cent of the total traffic. The two years of stupendous growth has led to total passenger traffic reaching almost 10 million a month. Room to grow on such a high base is limited.

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