Aviation sector faces grim future amid covid crisis2 min read . Updated: 22 Jun 2020, 10:37 PM IST
The high double-digit growth is now a thing of the past, as travel demand is likely to recover only in the second half of FY21, as per rating agency Icra. Mint looks at the pandemic impact on the sector and the way out.
Covid-19 has brought India’s aviation sector to its knees. The high double-digit growth is now a thing of the past, as travel demand is likely to recover only in the second half of FY21, as per rating agency Icra. Mint looks at the pandemic impact on the sector and the way out.
How has covid-19 hit the aviation sector?
Both domestic and international airline operations were halted by the Indian authorities after the covid-19 breakout. Thus, airlines incurred huge losses. Even after the operations resumed, passenger demand remained muted as people were wary of traveling. As a result, many airlines are sending back their leased aircraft to lessors and are planning operations with a limited number of aircraft. New fuel-efficient planes are being preferred over older aircraft. “The situation remains grim for airliners across the world and Indian carriers are no exception," said a senior official of a global aircraft leasing firm.
How did services fare after easing of cubs?
Airlines resumed operations on 25 May with limited capacity, two months after being grounded. However, due to muted demand, airlines recorded load factors of 44-57% in the last week of May, a far cry from a high load factor before the pandemic. At present, airlines are allowed to operate only 33% of their total capacity, which would slowly be increased, as per government rules. International air travel, meanwhile remains grounded. Domestic air passenger traffic fell by 43.39% year-on-year in January to May, due to the lockdown, shows data from the Directorate General of Civil Aviation (DGCA).
When is a recovery in passenger traffic expected?
Passenger traffic at Indian airports will remain under pressure in the first half of FY21 and a recovery is likely in the second half depending upon covid containment, said Icra. Passenger traffic across India is estimated to decline by 45-50% in FY21. International travel will be dependent on lifting of travel restrictions by countries, which is likely to happen in phases.
How are airlines likely to fare financially?
India’s aviation industry is likely to post losses of $3 billion-3.6 billion in the June quarter, according to aviation consultancy Capa India. Domestic carriers may incur losses of $1.75 billion in Q1FY21, followed by airports and concessionaires with losses between $1.50 billion-$1.75 billion. Ground handling firms may report a loss of $80 million-90 million. Airlines globall will lose over $84 billion in FY20, the most in history, while losses for FY21 are estimated at $16 billion, industry body International Air Transport Association (IATA) said.
How are airlines addressing the crisis?
In the absence of a tangible government bailout package, airlines have been focussing on reducing costs, while gradually scaling operations. Besides seeking a reduction in rental costs, domestic carriers have approached lessors seeking a deferment on the rentals and have managed to avail concessions, according to industry watchers. Domestic airlines are also seeking volume discounts from vendors, renegotiating payment terms and seeking a waiver on annual cost escalations for high-cost components.