Indian airlines on shaky path despite resumption of domestic flights: Industry2 min read . Updated: 22 May 2020, 01:10 AM IST
- With travel sentiments muted and fares capped, airlines are looking at huge losses in coming quarters
- Some smaller airlines may find it tough to survive and we could see mergers and acquisitions, and consolidation happen, says an analyst
India’s aviation industry is staring at an uncertain future despite the government allowing gradual resumption of domestic flights from next week as the coronavirus outbreak is likely to keep passenger sentiment subdued after an initial pent-up demand, said industry experts.
The capping of airfares by the government may further hurt carriers who are estimated to be incurring daily losses of ₹70-90 crore, and are still to receive any financial relief.
With travel sentiments staying muted and fares capped, airlines are looking at huge losses in the coming quarters, said Nripendra Singh, industry principal, aerospace, defence and security practice at Frost & Sullivan.
“Some smaller airlines may find it tough to survive and we could see mergers and acquisitions, and consolidation happen," Singh said.
As things stand, India’s aviation industry is expected to post losses of $3-3.6 billion this quarter due to covid-19-related disruptions, with airlines sharing the bulk of the hit, aviation consultancy firm Capa India said in a recent report.
The restart of flights from Monday after two months of suspension will take place amid the fourth phase of the nationwide lockdown set to end on 31 May.
Resumption of operations from 1 June would have given the industry more time to organize logistics issues and re-open bookings, especially as the standard operating procedures (SOPs) for flight operations were issued only on 21 May, said Kapil Kaul, South Asia CEO of Capa India.
Kaul said low fuel price will compensate for higher costs from implementing safety protocols. He said, however, that the government decision to cap fares will hurt airlines.
Airlines as well as passengers will have to follow various rules when flights resume, according to a document containing general instructions for commencement of domestic flight services, prepared by the civil aviation ministry.
For instance, airlines will no longer provide meal services, cabin baggage would be barred, passengers will have to wear a face mask and will need to reach the airport at least two hours before departure. Those with red status on Aarogya Setu app will not be permitted to travel.
Some states like Assam will insist on quarantine for all passengers coming by air, television news channel NDTV reported quoting the state’s deputy chief minister Himanta Biswa Sarma. Such measures are only expected to hurt travel sentiments further.
“We don’t know what the demand situation will be like," said a senior airline official, requesting anonymity, adding that while there may be pent-up demand initially, it is expected to taper off eventually.
Resumption of flights “will ease the stress of the airlines," said Jagannarayan Padmanabhan, director—transport and logistics, Crisil Infrastructure Advisory, who added that the plan to control fares should not, however, become a precedent for controlling prices later.
“Financial health of airline will have to be looked at individually. This will get panned out in the next 6 to 12 months," Padmanabhan said.
An industry executive expressed hope that the penchant for air travel will help to absorb the covid-19 shock eventually.
“The public has come to rely on air transportation, and it is part of our business and personal lifestyle. The connectivity we all depend on, remains as strong as ever,"said Ashmita Sethi, president and country head, United Technologies Corporation India Pvt. Ltd.