Active Stocks
Fri Apr 12 2024 15:57:45
  1. Tata Steel share price
  2. 163.50 -1.00%
  1. NTPC share price
  2. 362.00 -0.32%
  1. ITC share price
  2. 430.10 -1.56%
  1. HDFC Bank share price
  2. 1,518.90 -1.10%
  1. State Bank Of India share price
  2. 766.75 -1.57%
Business News/ Companies / News/  More Indian airlines could be facing collapse as travel curbs worsen headwinds
BackBack

More Indian airlines could be facing collapse as travel curbs worsen headwinds

The pandemic has caused a sudden squeeze in demand, accentuated by a week-long ban on domestic flights

Even if the ban on domestic flights is lifted, the fear of travel that has gripped people could mean that planes may fly near-empty. (Photo: Mint)Premium
Even if the ban on domestic flights is lifted, the fear of travel that has gripped people could mean that planes may fly near-empty. (Photo: Mint)

Barely a year after the grounding of Jet Airways (India) Ltd, more airlines in India are staring at a potential collapse in the aftermath of the Covid-19 outbreak, according to industry officials.

The pandemic has caused a sudden squeeze in demand for air travel, accentuated by a week-long ban on domestic flights by the government.

Though the government has said that the suspension, which starts from Wednesday, would be reviewed on 31 March, it could be extended further as the pandemic is continuing to spread across the country.

Even if the suspension is lifted, the fear of travel that has gripped people in wake of the deadly disease would likely mean planes would fly near empty.

“Just as things were looking better, just as fares were beginning to pick up, the Covid-19 pandemic has hit the sector," said an official with a low-cost carrier, requesting anonymity.

“At present, with all aircraft grounded, airlines are losing money," the official said, adding that airlines don’t make money when their planes are grounded.

Earnings of domestic carriers were impacted in the December quarter—traditionally considered a robust period for air travel—because of a price war caused by excess capacity and sluggish demand in a slowing economy.

Things began to improve from the start of this year as airlines embraced better pricing discipline, leading to higher fares. But with the outbreak of Covid-19, the scenario has turned grim.

“The chances of everyone emerging unscathed is very low," said another airline official who spoke on condition of anonymity.

“Even if the government supports a bail-out for the aviation industry, at least one airline could be in a difficult position to continue with their operations. And if the government doesn’t support a bailout, more than one airline could be gasping for their lives," the official said.

Aviation consultancy Capa India estimates that Indian airlines could be forced to ground as many as 150 planes in the coming days as government restrictions on air travel amid the pandemic may not end soon. The estimates did not take into account the government’s decision on Monday to suspend domestic flights until March-end.

The Federation of Indian Chambers of Commerce and Industry (Ficci) said in a report titled Impact Of Covid-19 On Indian Economy that some domestic airlines have reported a more than a 30% drop in domestic travel this summer, compared with last year, while fares on popular domestic routes have plunged 20-25%.

“According to the data available with the ministry of civil aviation, nearly 585 international flights have been cancelled to and from India between 1 February and 6 March because of the outbreak of coronavirus. Cash reserves of airline companies are running low and many are almost at the brink of bankruptcy," the Ficci report said.

Globally, over 16,767 people have died due to Covid-19, while the number of infected crossed 387,382, according to the latest data by Johns Hopkins University.

The only way to check the spread so far is through social distancing, which is tough to maintain for any airline.

India’s Directorate General of Civil Aviation has come out with safety guidelines such as leaving the middle seat empty and maintaining a one-metre distance between flyers and check-in executives at airport counters. These would involve significant additional cost burden, over and above other steps such as sanitizing planes, airline executives said.

A recent ICICI Securities report on two listed airlines, IndiGo and SpiceJet, forecast IndiGo to post a loss of 230 crore and SpiceJet to report losses of up to 525 crore in FY21.

“Our assumptions lead to 2.3bn loss for IndiGo with net cash of 91bn as at FY21- end," the report said. “Our assumptions lead to Rs5.25bn loss for SpiceJet with net debt of Rs26.5 bn as at the same date," it added.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 24 Mar 2020, 07:00 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App