Indian aviation’s wings will remain clipped long after the coronavirus lockdown

For India’s coronavirus-wrecked aviation sector, the bad times are likely to continue long after the ongoing 21-day national lockdown.

The sector watchdog, directorate general of civil aviation, on March 27, banned all domestic passenger flights in the country till April 14, when the lockdown ends. International operations, too, have come to a standstill due to flying bans imposed by many countries. For an already ailing sector, the pandemic has been a body blow.

While most Indian airlines are taking domestic bookings for April 15, India’s ministry of civil aviation has not confirmed if operations will resume from that date.

The curbs and the uncertainty have paralysed the sector and are bound to cause unprecedented turmoil.


“The April-June period, traditionally one of the stronger quarters for Indian airlines, is increasingly looking like it will be a washout. This will have implications for July-September (usually the weakest quarter) and for the rest of financial year 2021,” said Sydney-based aviation think tank Centre for Asia Pacific Aviation (CAPA), in a report published in last week of March.

India’s two listed carriers, IndiGo and SpiceJet, could report combined losses of up to $1.5 billion across January-March and April-June quarters, CAPA estimated. “IndiGo’s hitherto enviable cash reserves may almost be wiped out,” it said.

The aviation industry could bear losses of up to $3.6 billion in the April-September period, CAPA said based on the assumption that domestic and international operations will remain grounded till June 30.

Sectors of the industryEstimated losses in Q1 FY21
1Airlines$1.75 billion
2Airports and concessionaires$1.50-$1.75 billion
3Ground handlers$80-$90 million
4Total$3.3-$3.6 billion
Passenger traffic degrowth

Even before the coronavirus-related disruption, Indian aviation was reeling from an economic slowdown that had brought passenger traffic to low single-digits.

Passenger
 traffic
Growth
 year-on-year
Passenger traffic
Growth year-on-year
2017-18
112 million
17.9%
2018-19
129
15.1
2019-20
134
3.
Now, it is expected to contract in the ongoing financial year.

“Passenger growth of airlines is to register a negative 20-25% growth in the financial year 2021,” predicted Mumbai-based credit agency, Care Ratings in a report on March 25. “Even post the nationwide lockdown, fares of airline operators may remain low considering the lack of air travel demand.”

The low demand may force carriers to postpone their expansion plans. “There is a strong likelihood of aircraft orders being deferred or even cancelled. Some leased equipment, particularly those aircraft approaching the end of their lease terms, may be returned early to lessors,” CAPA noted in its report.

Read more at: https://qz.com/india

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