Air travel has demand shortage: CAPA India

The Ministry of Civil Aviation (MoCA) in India has been periodically and proactively putting out data on the revival of air travel, which had been suspend from March 23 to May 24, and thereafter, saw a slow take-off due to multiple regulations. On October 11, the MoCA data showed that 1,78,431 passengers travelled on 1,515 flights, which many in the industry believe is a far cry from the air traffic numbers over the same period last year. Kapil Kaul, CEO & director, CAPA South Asia (CAPA India), an aviation research, advisory, and consultancy firm, says that “demand challenges” continue to plague the sector and pose a risk to airlines. Edited excerpts of his interview to Fortune India:

According to you what direction is Indian aviation headed in?

Indian aviation's long term direction and potential continues to be fundamentally solid. We continue to see India as the aviation market of the 21st century. However, India has to convert this massive potential by having the right policy, regulatory, fiscal and governance architecture. And for this, we need to build a very strong institutional infrastructure.

We also need a structurally profitable sector, across the value chain. Aviation has to be taken more seriously and it needs to be made central to our economic competitiveness.

Post Covid-19, we (the government) must deliver on wide-ranging reforms. These should include: turning the Directorate General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security into solid independent institutions; dismantle government ownership of aviation assets; align Indian aviation with global best practices and ensure institutional integrity at privately-run aviation businesses, among others.

Does the concept of “air bubbles” actually benefit Indian airlines?

Air bubble is temporary and a short-term measure. It also serves as a protection from sixth freedom carriers, which Indian carriers may prefer. Yes, Air India did benefit in the initial few months, but nothing significant given the massive losses likely [for it] in FY21.

Though it's a temporary measure, what happens to Jet Airways’ prized international slots in the new scheme of things?

See, Jet Airways is heading for liquidation as the current measures don't make sense to me.

Indian railways hasn’t fully resumed its services. Once it does, would there be any impact on the current levels of air passenger traffic?

Yes, it will have some impact as the current air traffic continues to be largely emergency and essential travel. We continue to see serious demand challenges especially in the business and leisure segments. Without these segments demand risks will continue [for airlines].

How will the Supreme Court’s directive on ticket refunds impact Indian airlines?

The SC has accepted the DGCA's recommendations. It has actually given some relief to the airlines, as most of them don't have funds to refund. However, how will passengers be refunded if some of the airlines close? The DGCA has not factored this in their recommendations. The DGCA is aware that the closure of Kingfisher Airlines and Jet Airways had resulted in massive losses for the consumers. It seems passengers will have to bear this risk [again].