Indian airlines are expected to witness a 47% decline in passengers, in 2020, on account of the restrictions imposed to contain the spread of Covid -19 virus and the consequent economic downturn. The Indian government should also help the aviation sector with a financial package and help develop a high yield market to ensure profitability of airlines in the aftermath of crisis, said industry executives at a webinar conducted by Capa India.
The aviation sector has been the worst casualty of the Covid-19 pandemic, as flights had to be grounded for two months. Airlines, though, have started operations in the domestic market since May 25 with heightened restrictions and safety measures in place. As a consequence of the total shut down of the sector sustainability of some of the airlines have now come under the scanner.
According to Alexandre de Juniac, chief executive and director general, International Air Transport Association (IATA), it is disappointing that the package of economic relief unveiled earlier this month contained nothing for airlines in the form of direct financial relief in comparison to the relief measures announced by some of the other major economies.
“We expect passenger demand for 2020 to fall 47%, with revenue reduced by $11 billion compared to last year. About 3 million jobs, including those that depend on aviation, such as travel and tourism, are also at risk. The Indian carriers, like many airlines around the world, are in survival mode," said Juniac.
He also urged the India government to help airlines raise funds though equity and not pile on more debt to ensure meet their capital requirements.
Airline in India operate on low yields due to the high taxes levied on aviation fuel and other charges like landing and parking slots at airports.
According to Jeffrey Goh, chief executive, Star Alliance, the Indian market is known for low yield and high cost structure and the government now needs to do more to reduce the cost structure.
“Prior to the crisis, the Indian market was growing head to head with China. That’s the reason we integrated Air India because we wanted to be a part of the growth story. The road to recovery will be long. We are working with the government to restore confidence," he added.
Goh also said that the Indian government should continue to invest in building infrastructure for the aviation sector to avoid any bottlenecks related to capacity.