Entry of new players to weaken health of airline sector: HSBC Global Research

The entry of two new carriers – Akasa and Jet Airways 2.0 – is likely to weaken the health of the domestic airlines sector due to upcoming fare wars and excess supply in a market recovering from a major pandemic, further adding pressure on load factor and yields of incumbents, HSBC Global Research said in a report on Friday.

“While demand recovery could resume in Q2 CY22 (April-June 2022 quarter), causing some optimism, that could be short-lived as two new airlines plan to start operations in H2 CY22 (July-December 2022),” the report titled ‘Indian Aviation, 2022: A year of two halves’ said.

“Amidst all these challenges, investors are concerned about the yield outlook…. we think the fare war could be an obvious outcome of excess supply in the market.

On our calculation, the industry could add 80-85 aircraft this year which could increase the gap between demand and supply, adding pressure on the load factor and yield,” it added.