Despite lockdown easing, woes of the aviation sector unlikely to abate in coming months2 min read . Updated: 31 May 2020, 10:55 PM IST
Generating demand will be difficult in the coming months as only essential travel is taking place, say experts
India’s civil aviation sector may continue to languish in the near to medium term as demand is expected to stay muted with cost-conscious corporates restraining employees from travelling while coronavirus fears and the impact on household incomes affect the demand for leisure travel.
The tepid demand over the next six months to a year will prove to be the biggest challenge for cash-strapped airlines in continuing their services, according to industry experts. India on 25 May lifted a two-month ban on domestic flights with strict restrictions and safety measures. Also, airlines have been allowed to use only a third of their summer schedule for 2020.
Experts said the present demand is mostly from people who were stuck in various parts of India because of the lockdown imposed to check the spread of coronavirus. This demand, the experts said, may taper off in the coming months.
Global passenger demand is likely to drop 47% and airline revenues could fall by $11 billion in 2020 because of covid-19, according to a forecast by industry body International Air Transport Association.
The change in lockdown rules and the resumption of economic activity was inevitable and is a step in the right direction, said Peeyush Naidu, partner, aviation practice, at Deloitte. “The demand for air travel that we are witnessing is potentially more of pent-up demand on account of people needing to get back to their homes or needing to attend to urgent matters. The next phase of demand would depend on the increase in economic activity, cost pressures on corporates impacting business travel, and the confidence of travellers on the systems and processes put in place for their health and hygiene," Naidu said.
The Centre on Saturday announced measures to open up the economy and lift lockdown curbs in a phased manner from 8 June.
Big corporates, especially IT companies, have asked employees to work from home for 6-9 months and, as a result, executive travel will be limited, said Jyoti Mayal, president, Travel Agents Association of India (TAAI).
“Generating demand will be a challenge in the coming months because only essential travel is taking place and it will again reduce. Maybe, we will see some demand during Diwali. Also, leisure travel is not expected to revive soon as people will use their cars more and avoid taking flights. With the easing of the lockdown, the passenger sentiment might revive in some months," Mayal said.
The airlines have urged the government for relief through steps such as lower taxes on fuel and airport charges.
“Apart from the economic downturn, safety related issues will also impede people’s decision to travel by air. Maintaining social distancing is not possible in an aircraft and recently some passengers tested positive and others close to them were quarantined. This will further impact the sentiment," said an industry executive.