DOMESTIC air travel picked up sharply in November as improved economic environment encouraged both business and leisure travel, but air fares are yet to recover, suggesting that financial performance of airlines may not look as good.

According to data released by the directorate general of civil aviation (DGCA), airlines flew 39.57 lakh passengers during the month, up nearly 30% compared to the corresponding month last year.

Domestic airlines such as Air India, Jet Airways, IndiGo and SpiceJet clocked over 70% flight occupancy in November. Amadeus India managing director Ankur Bhatia, who tracks the aviation sector closely, however, said airlines were still behind the break-even level. "Fares have still not firmed up. In the first 15 days of December, there has been 40% jump in net travel transactions but yield has not improved at the same pace," he said.

Airlines have increased capacity since June this year to meet the gradually improving demand. The country's largest private carrier by market value, Jet Airways, witnessed a 33% surge in passenger numbers in November.

The share price of airline companies is up nearly 50% since October-end compared to a 10% rise in the benchmark indices. However, part of the improvement in the traffic could be due to the base effect, as air travel had plummeted after the financial crisis broke out. Domestic airlines carried 39.96 million passengers during January-November this year, up 5.45% compared to the corresponding period in 2008. The domestic airline industry lost close to Rs 10,000 Crore in 2008-09 as demand weakened due to the global financial meltdown. Spiraling fuel price and excess capacity added to the woes of carriers.

Airline companies subsequently reduced capacity in a desperate bid to contain losses. The cut in fleet size has resulted in optimum utilization of capacity.