India’s jet fuel demand is unlikely to return to pre-pandemic levels in the current calendar year on account of a slower rebound in long haul flights, S&P Global Commodity Insights said on Monday.
Air travel measured by flights, returned to pre-pandemic levels in India, but jet fuel demand is still expected to remain below 2019 level in 2023, due to a slower rebound in long-haul travel and distressed airline industry, it said.
Led by a surge during the summer travel season, the country’s total domestic commercial flights averaged around 88,400 per month for January-June 2023, about 2.5 per cent higher than the same period of 2019, it pointed out.
While even steeper recovery was seen in international flights with total commercial flights averaging to 14,000 per month for the first six months of 2023 versus 12,500 per month in 2019, as per data gathered from the Directorate General of Civil Aviation (DGCA), it added.
“On a similar trend, we see a strong recovery in passenger footfall in both domestic and international segments. Data from DGCA suggest an average growth of 8 per cent in domestic passenger footfall for the January-June period of 2023 over 2019 while in the international segment, passenger footfall saw an increase of 13 per cent for the same time. Pent-up demand, especially in international travel, is giving a boost this year as long-awaited routes open,” S&P Global Commodity Insights has projected.
Long-haul flights
Further analysis of data provided by DGCA show that although the number of flights has returned to 2019 level, the distance travelled by them is yet to recover, Analyst for South Asia Oil Market at S&P Global Commodity Insights, Himi Srivastava said.
“This means that flights are now shorter than before, as long-haul routes are slower to recover. For January-June 2023, average kilometres travelled per month were 79.5 million vs 79.6 million in 2019 for the domestic segment, however, the numbers lag quite a bit for the international segment, from per month average of 45.6 million in 2019 down to 43.8 million in 2023,” she added.
The lack of recovery of longer flights accounting for lower kilometres travelled is one of the main reasons pulling back jet fuel demand as jet fuel demand is highly correlated to distance travelled by flights, Srivastava explained.
Demand recovery
Jet fuel demand recovery is a key theme in 2023 and 2024 for India and globally, S&P Global Commodity Insights said adding that it estimates India’s jet fuel demand to remain slightly below the pre-pandemic level in 2023 and to fully recover by Q1 2024, assuming the growth continues at the same pace.
“However, there remains an underlying vulnerability to global economic recession. If fuel prices surge again or discretionary income and employment weaken then lower load factors could necessitate reduced flight schedules and thus, lower fuel consumption,” it added.
In parallel with jet fuel demand, it is noted that residential kerosene demand has significantly dropped in the past three years due to a push by the government to switch to cleaner fuels and will continue to tumble. Considering this, total jet fuel and kerosene demand in India will unlikely recover to the 2019 level until 2025, it has projected.