Second wave rattles Indian aviation to bones

Indian airlines face grim prospects without bailout

Business

June 1, 2021

/ By / New Delhi

Second wave rattles Indian aviation to bones

Market leader IndiGo was slow on feet as its total departures shrank by only 28 pc and operated 31,516 flights in April, about 52 pc of all domestic flights (MIG photos)

Second wave of Covid-19 that began sweeping across India in March has brought Indian aviation sector to the edge as passenger traffic collapses again and hands back the gains made since autumn last year. All carriers face severe liquidity pressures and need urgent cash injection. Will the government help at least this time around?

On Sunday, the 11,675 employees of SpiceJet, India’s second-largest domestic carrier received an email informing them that their salary structures stood modified with immediate effect and that they would be paid only on the basis of number of hours worked. The airline blamed it on passenger traffic falling to under 10 pc of the levels before the pandemic hit India in 2020.

Unpleasant it may have been but the email should not have come as a big surprise to the employees. The country’s second largest carrier has been in deep trouble for a while as losses have mounted while passenger numbers have fallen dramatically from March onwards, after having begun to look smartly up since late last year as traffic rose steadily for at least four months before the floor gave way with the outbreak of the deadly second wave.

SpiceJet management can take heart from the fact that the carrier is not the only one facing a stark future, at least until the demand revives and if the number of fresh infections of coronavirus keep falling as they have over the last two weeks or so. In view of the drop in passenger traffic, from June 1 all airlines would be allowed to deploy only 50 pc capacity, down from 80 pc earlier, as number of air travellers in April stood at 5.7 million as against 7.8 million in March.

Data by ICF says that GoAir and Air Asia India were the fastest to respond to the market developments as the former’s departures dropped 62 pc from 201 on April 1 to a mere 77 on April 30 and latter’s numbers dropped to 55 from 161. Market leader IndiGo was slow on feet as its total departures shrank by only 28 pc and operated 31,516 flights in April, about 52 pc of all domestic flights. SpiceJet cut its flights by 47, but evidently nowhere enough to cushion the shock of a collapsing market.

Aviation sector headed for crash-landing

The second wave could not have come at a worse time for the Indian aviation sector. Things had been looking up since November and air travel was slowly but surely reviving, with a steady rise in passenger numbers every month from October to February. Most airlines were banking on the growth to continue right through to the peak summer months and thus recoup some more of their losses.

But the outbreak of second wave and that too hitting the key metros the first sent the traffic plunging again and ensuring that the summer of 2021 would be a complete washout and no better than 2020.

But the plight in which the airlines find themselves now is not only due to the pandemic, but also poor management as few carriers have proven to be nimble footed to be able to deal with the volatility and unpredictability of the pandemic. For instance, a research firm ICF says that the airlines failed to pull out flights in response to the falling numbers. It says that the daily flight count fell 35 pc even as the traffic had fallen at a much faster rate.

Ringing an alarm bell, aviation research organisation CAPA India warned that the crisis in the aviation industry in India had reached a point of no return due to the impact of the pandemic and added that unless the government immediately adopted measures to contain the crisis, the sector could face an irreparable loss. CAPA tweeted that the government could no longer ignore the situation and failure to reduce the distress and that too within days could lead to an irreparable, long-term damage to the millions of employees and the sector as a whole.

Earlier, on May 3, CAPA India had released a report where it said that Covid-19 had ‘inflicted massive losses and led to an increasing debt burden on carriers that were structurally ill-equipped to absorb this impact’. It went on to add that Indian carriers lost about USD 70 (INR 5,500) per flyer in the last fiscal.

Government bailout critical

Unfortunately for the Indian aviation sector, the Indian government has adopted a contrarian approach to the global response to the pandemic. While the governments the world over have been handing out record bailouts to help cushion the impact of the pandemic on their economies, companies as well as people, the Indian government has been surprisingly stingy about any bailout to any firm or even a significant cash handout to the vulnerable sectors of the population. In essence, it has left everyone, companies or individuals, to fend for themselves.

It has also been true for India’s tourism, hospitality and aviation industries which have been crippled since March 2020. This is in stark contrast to the policy adopted by many governments overseas that have not only given cash handouts to the vulnerable individuals but also provided furlough payment to those whose work had been disrupted by the pandemic as well as to companies of all sectors and sizes.

According to an estimate by IATA, global airline industry has received cash support of over USD 100 billion since April 2020. Of this, the United States alone accounted for over a quarter, while the European Union governments were also generous with their carriers. Air France KLM Group received over EUR 11.5 billion (USD 14 billion), Lufthansa Group got over USD 10 billion and British Airways Group over USD 4 billion, besides the furlough paid by the government directly to the employees. The list covers practically all the airlines operating in the EU.

So far the Indian government has turned a blind eye to the sector’s troubles, but if it does not interject immediately, as cited by CAPA India, the sector may be headed for a crash landing.

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