The recent data presented by Directorate General of Civil Aviation ( DGCA) shows that February is the fifth consecutive month where domestic passenger traffic grew over 20% on a year-on-year basis.
In February, Indian airlines flew 7.4 million passengers as against 6 million passengers in the corresponding month of the last year, indicating a jump of 24.7%. The firm trend in traffic and lower fuel prices are expected to support valuation of aviation stocks in the short and medium term.
There are a few factors which have contributed to the growth in passenger traffic. First, airlines have been passing on the benefit of lower crude oil prices to travellers. Second, as rail fares have increased in the recent months, the difference in fares of rail and airlines has narrowed for key routes such as Mumbai-Delhi, Mumbai-Bengaluru, and Mumbai-Chennai.
It has been observed that the difference between the fares of rail (AC 2-tier) and air is in the range of Rs 700-800 on these key routes. Due to this, there has been a meaningful migration of travellers from rail to air.