New Delhi, August 21, 2023
Introduction
In a surprising turn of events, India’s jet fuel demand is anticipated to surge back to its pre-pandemic levels by the first quarter of 2024, as per insights from S&P Global Commodity Insights. This optimistic projection defies earlier forecasts and stems from robust flight data indicating a promising resurgence within the aviation sector.
Despite the steady resumption of both domestic and international flights to pre-pandemic frequencies, the consumption of jet fuel has struggled to keep pace throughout 2023. Analysts attribute this challenge to the gradual revival of long-haul travel and the persistent hurdles faced by the beleaguered airline industry.
DCGA’s Data
Data sourced from India’s Directorate General of Civil Aviation (DGCA) reveals that during the first half of 2023, domestic commercial flights averaged around 88,400 per month, surpassing 2019 levels by 2.5%. A more notable surge was witnessed in international flights, with an average of 14,000 flights per month during the same period, compared to 12,500 in 2019.
Passenger numbers have mirrored this upward trajectory, with DGCA data showcasing an average growth of 8% in domestic passenger volumes during the first half of 2023 compared to the same period in 2019. The international segment experienced an even more impressive surge, with passenger footfall surging by 13% during the same time frame. This growth was driven by pent-up demand and the resumption of long-awaited international routes.
SP Global Commodity Insights data
Himi Srivastava, an analyst at S&P Global Commodity Insights, highlighted that while flight numbers have returned to 2019 levels, the distances these flights cover have not fully recovered. The slower return of long-haul routes has resulted in shorter flights. Domestic travel, for instance, saw an average of 79.5 million kilometers traveled per month during January-June 2023, slightly shy of the 79.6 million km recorded in 2019. In the international segment, the recovery lagged even further, with an average of 43.8 million kilometers traveled per month in 2023, down from 45.6 million in 2019. This failure of longer flights to rebound has been a primary factor dampening the recovery of jet fuel demand, as consumption is closely linked to the distances flown.
The resurgence in jet fuel demand remains a central focus for both India and the global aviation sector throughout 2023 and 2024. S&P Global Commodity Insights predicts that India’s jet fuel demand will remain slightly below pre-pandemic levels in 2023, with a full recovery expected by Q1 2024 if the current growth trend persists. Nevertheless, this recovery is not devoid of risks, as concerns linger regarding the vulnerability of this rebound to potential global economic downturns. An abrupt increase in fuel prices or a weakening of disposable income and employment could lead to reduced flight schedules, subsequently impacting fuel consumption.
Concurrently, there has been a substantial decline in residential kerosene demand in India due to various government initiatives promoting cleaner fuels. This trend is foreseen to continue, resulting in total jet fuel and kerosene demand in India likely not reaching 2019 levels until 2025.
Conclusion
As the aviation industry navigates its path to recovery, all eyes will remain fixed on India’s jet fuel demand, with expectations of a resounding comeback by the first quarter of 2024, albeit not without potential challenges on the horizon.
