Omicron disrupts domestic passenger traffic

Airlines witnessed domestic passenger traffic growth during June 2021 – December 2021 with the same reaching ~22 million in December 2021 (highest since the start of pandemic in March 2020) and ~88 per cent of pre-pandemic levels (December 2019). However, the recovery trend in passenger traffic was disrupted due to Omicron

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The easing of restrictions by state governments, healthy pace of vaccination and dip in Covid-19 infections had resulted in healthy sequential domestic passenger traffic growth during June 2021 – December 2021 with the same reaching ~22 million in December 2021 (highest since the start of pandemic in March 2020) and ~88 per cent of pre-pandemic levels (December 2019). However, the recovery trend in passenger traffic was disrupted due to Omicron.

Giving more insights, Rajeshwar Burla, Group Head, Corporate Ratings, ICRA, said, “During January 1, 2022 to January 17, 2022, the domestic passenger traffic is lower by 34 per cent compared to December 1, 2021 to December 17, 2021. This is due to significant rise in the fresh infections on account of Omicron, which resulted in apprehensiveness to travel, imposition of localised restrictions in key states and consequent slowdown in leisure travel. Major domestic airlines have announced plans of reduction of capacity deployment due to lower demand. The domestic passenger traffic is likely to witness M-o-M de-growth of 40 per cent-42 per cent in January 2022 and 15 per cent-17 per cent in February 2022 resulting in temporary slowdown in the recovery of domestic passenger traffic in Q4 FY2022. Overall, passenger traffic is expected to be lower by 40 per cent-45 per cent in Q4 FY2022 and the traffic recovery for FY2022 is moderated to 52 per cent of pre-Covid level as against our earlier estimates of 62 per cent of pre-Covid level.”

 

“ICRA expects domestic air travel to recover back to pre-Covid levels by FY2023 and the international sector by FY2024. This is factoring in the assumption that impact of future Covid waves (if any) to be low.”

 

Due to healthy recovery in passenger traffic post second wave impact and dip in Covid-19 infections, the Directorate General of Central Aviation (DGCA) in November 2021 had announced plans to allow resumption of scheduled international commercial operations from December 15, 2021. However, the new Covid-19 variant, Omicron, has forced the regulator to extend the ban on international commercial operations till January 31, 2022 and is expected to be further extended. Once restrictions are lifted, the recovery of international passenger traffic is expected to happen in a gradual manner and is expected to reach pre-Covid levels only by FY2024.

“The pace of passenger traffic recovery is expected to be sharp and much faster when compared to the second wave of pandemic. As for the airport operators, their strong on balance-sheet liquidity is expected to support their credit profile in the near term. However, the outlook on the airport infrastructure continues to remain Negative. ICRA expects domestic air travel to recover back to pre-Covid levels by FY2023 and the international sector by FY2024. This is factoring in the assumption that impact of future Covid waves (if any) to be low,” Burla added.

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