Why India’s Airlines Are Flying More Empty Seats Overseas

IndiGo, the nation’s biggest carrier operated by Interglobe Aviation Ltd., and second-placed SpiceJet Ltd. nearly doubled their capacity on international routes in August, according to BloombergQuint’s calculations.

Indian carriers began adding capacity to plug the supply gap created by Jet Airways (India) Ltd.’s shutdown in April. The grounding of Naresh Goyal-led airline cut the capacity of Indian carriers on international routes by over a fifth. Airfares spiked initially, improving the yields but the benefit didn’t last as other airlines added flights.

That additional capacity was not complemented by a similar growth in the number of air passengers, forcing airlines to fly more seats empty. The passenger load factor—percentage of seats filled—fell for IndiGo and SpiceJet in August to 76.6 percent and 78.2 percent, respectively. It’s lower than the industry average and below their four-year averages.

This could be because it usually takes time for a new route to mature and turn profitable, said Ansuman Deb, aviation analyst at ICICI Securities. The profitability, however, could increase over the long term as these international routes mature, he said.

The rapid capacity addition coupled with a lean tourist season also led to a fall in ticket prices. Airfares have been falling as carriers are adding capacity on long-haul and short-haul international routes, said Sharat Dhall, chief operating officer B2C at Yatra.com. But ticket prices are still higher compared to last year, he said.