Eleven thousand passengers separated Air India and Vistara in October – Will AI push Vistara out in November?

As November comes to a close, the month has seen the highest ever domestic passenger numbers recorded post COVID lockdown in India. However, I was closely tracking data for October and waiting for the regulator to declare the granular data for October. The summary for October was about Air India topping the OTP charts but there was more to it and I was waiting for the details to write about it, hence delaying my monthly column on this subject.

Last week, the TATA Group and Singapore Airlines group announced the merger of Vistara with Air India which will be completed by March 2024. It coincided with the arrival of VT-AEF, the first of the five leased B77Ls. Even as everyone looks at challenges and opportunities around that, Air India has grown from strength to strength in the domestic market in the last few months. So much so that it could push Vistara out of its number two spot very soon. A quick recap before we look at those details

October summary

At One crore fourteen lakh passengers, passengers were 10.15% higher than September. 

On a per day basis, the traffic was up 6.63% higher than September. This comparison is necessary since October has 31 days while September has 30.

October was the Diwali month and while the expectation was to cross the 4 lakh mark per day during the festival, that was not the case. The overall fleet in the country has gone down over previous year while the operational fleet is even lesser – thanks to supply chain issues and financial issues for the airlines. 

There were three things to look forward to in October. What was the margin between Vistara and Air India for the number two spot, who came on top of On Time Performance charts and what did Akasa Air do? The answers have been interesting

Read: Air India gains momentum in September as industry is setup for a great winter

Vistara continued with the second spot but did not reach the 10% mark. Akasa Air gained 0.5% market share and crossed the 1.5 lakh passengers per month mark while Air India topped the OTP charts.

There were no surprises with the load factor or market share with SpiceJet continuing its leadership with 88.1% but had serious competition catching up with  Go FIRST (86.7%), Vistara *85.5%), AirAsia India (84.2%), Air India (82.7%) and IndiGo (82.1%). The market share was 18.3% in favour of FSC.

Eleven thousand passengers

Air India saw 10,37,506 domestic passengers in October while Vistara carried 10,48,868 passengers. The difference? 11,362 passengers or roughly 366 passengers per day. Interestingly, Air India operated more flights than Vistara, 7973 to Vistara’s 7282 the same month or 23 more per day. But the difference was the load factor, 82.7% of Air India to 85.5% of Vistara.

In November, the load factors were neck to neck for both the airlines which is an indicator that Air India could push itself beyond Vistara by a very slim margin of two to five thousand passengers at the most.

Vistara occupied the number two spot for the first time in July. The airline also crossed the 10% market share for the first time that month. Since then, ironically – the airline has lost market share even as it continued to occupy the number two spot. During the same time, Air India has gained market share on the back of additional capacity being deployed. 

Outlook

November has been tremendous. The Winter schedule has started on a good footing. There has been a growth of 23,000 passengers daily on an average as compared to October. This has come on the back of over 100 daily flights being added across airlines and all of this amidst the chaos that groudnings have created. The additional capacity is on the back of wet lease by SpiceJet, added aircraft being available for Air India and IndiGo delaying redelivery and in at least one case – re-inducting an aircraft in its fleet (VT-ITF). 

As the Air India – Vistara combine grows and corners more passengers, where will the passengers come from? One way is to increase the demand and corner all of it but that does not happen in actual conditions since everyone gets a slice of the added pie. The other obviously is to snatch some market from others and that would mean, adding more capacity than the market growth rate and taking away people from other airlines. This approach would lead to Go FIRST and SpiceJet being in increased pressure to guard their routes but the impact will also be felt by IndiGo and could lead to its market share eroding from the current levels.

As has been the case in the past, I see IndiGo talking about profitability over market share going forward and yield over load factors. But while it talks so, is it possible to really be profitable? We will know very soon! IndiGo has lost INR 14,117 crore in the last 16 consecutive quarters (three years). As Air India goes into investment mode it would be willing to burn some cash – can IndiGo afford the burn now?

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