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Cash-strapped aviation sector to lose more money due to lockdown extension

Domestic air passenger traffic is expected to drop from an estimated 140 million in FY20 to around 80-90 million in FY21. Photo: Abhijit Bhatlekar/MintPremium
Domestic air passenger traffic is expected to drop from an estimated 140 million in FY20 to around 80-90 million in FY21. Photo: Abhijit Bhatlekar/Mint

  • India’s aviation industry is expected to post losses of $3-3.6 billion in the June quarter because of covid-19
  • Airlines, which had already started taking bookings for travel after 14 April, now prepare to face an extended suspension of their operations

NEW DELHI : The Indian civil aviation industry, which is already facing a debilitating cash crunch, is expected to lose more money with the government’s decision to extend the countrywide lockdown from 14 April to 3 May.

The grounding of flights has dried up revenue for the sector and the domestic aviation industry will lose millions of dollars more in the coming days because of the continuation of the lockdown imposed to contain the spread of the novel coronavirus.

“The revenue loss of the aviation industry spread across airlines, airports and retail is estimated to be $1-1.5 billion per month of lockdown," said Jagannarayan Padmanabhan, practice leader and director, transport and logistics, at CRISIL Ltd. “About 70% of this will be borne by the airlines."

All international and domestic scheduled airline operations will remain suspended till 3 May, the ministry of civil aviation said on Tuesday after Prime Minister Narendra Modi conveyed the extension of the lockdown in his televised address.

India’s aviation industry is expected to post losses of $3-3.6 billion in the June quarter because of covid-19, with airlines sharing the bulk of the hit, aviation consultancy firm Capa India had said in a report last week. The sector, battered by the pandemic, is also expected to see sharp declines in both domestic and international passenger traffic, it said.

However, the lifting of the lockdown will only make sense for airlines if states also lift local lockdowns and allow free access to and from the airports, said a senior official with a private airline.

“Airlines will continue to struggle to meet the direct costs of operation as long as every other seat has to be kept empty for social distancing. However, most of all, airlines will not be able to regain their footing until public confidence to travel is back and that is not expected until the fear of the virus itself dies down," the official said requesting anonymity.

“Government financial support is essential as otherwise the entire industry, which drives 3% of gross domestic product, may collapse. A collapse of the industry will have much larger ramifications as it is an essential infrastructure industry," added the industry official mentioned above.

Meanwhile, airlines, which had already started taking bookings for travel after 14 April, are preparing to keep operations suspended for longer.

“Following orders from the ministry of civil aviation issued to all airlines, we have extended the suspension of our operations until 3 May. We are cancelling the affected bookings and will offer customers free of charge rescheduling to another date until 31 December. Fare difference, if any, will be applicable," said a Vistara spokesperson.

“We will restart flight operations on vital corridors of air traffic from 4 May. We will begin operations for domestic only and then gradually ramp it up further, to commence operations on some international routes as well," said Ronojoy Dutta, chief executive officer, IndiGo.

“We look forward to resuming our operations soon, once we receive approvals," said an AirAsia India spokesperson.

“We are cancelling reservation of those who booked themselves for travel till 3 May. Upon cancellation, your entire mount will be maintained in a credit shell, and the same may be used to make fresh booking and travel till 20 February 2021," SpiceJet said in a statement.

GoAir and Air India did not comment.

“Significant funds of passengers are already locked with Indian carriers as a result of advance bookings prior to the lockdown and the decision to allow bookings post 14 April without any decision of the lifting of lockdown will increase the risks, which needs to be avoided," Capa India had said last week.

“Giving credit vouchers for all advance bookings prior to the lockdown was expected and is reasonable, but not for bookings after 14 April," the consultancy firm added.

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