Indian airlines on shaky path despite resumption of domestic flights: Industry

Indian airlines are staring at an unforeseen future ahead despite the gradual resumption of domestic flights allowed from next week as passenger sentiment is likely to remain subdued once initial pent up demand is over, industry experts and executives said.

The capping of airfares by the government may further hurt airlines, which have already been incurring daily losses to tune of ₹70-90 crore, and haven't received a bailout package or a revenue support from the government during its latest stimulus moves to revive the economy, said people involved in the industry.

With muted travel sentiments, and capping of air fares, 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 added.

As things stand, 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 said in a recent report.

The sector is also expected to see sharp declines in both domestic and international passenger traffic after services resume on 25 May, following two months of grounding.

Resumption of operations from 1 June would have given the industry more time to organize logistic issues and re-open bookings, especially as the standard operating procedures (SOPs) for flight operations were only released on 21 May, said Kapil Kaul, South Asia CEO of CAPA-Centre for Aviation.

Kaul said that low fuel price will compensate for any increase in operational protocols, adding that capping fares will, however, hurt airlines.

Aviation turbine fuel prices in India have fallen over 65% year-on-year amid a global drop in crude prices, but high local taxes on the fuel mean that even the benefit of sliding international prices is likely to elude Indian carriers.

The resumption of flights from 25 May will come with various other caveats, according to a document containing general instructions for commencement of domestic flight services, prepared by the ministry of civil aviation (MoCA).

For instance, airlines will no longer provide in-flight meal service for passengers, check-in bags will not be allowed inside the cabin, passengers will be required to wear a face a face mask for travel and need to reach the airport at least two hours before their flights. Passengers with red status on Aarogya Setu App would not be permitted to travel.

Some states like Assam will insist on quarantine for all passengers coming by air, television news channel NDTV reported today 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, who requested anonymity, adding that while there may be pent up demand initially but demand is expected to be muted after that.

According to lobby group International Air Transport Association, Indian airlines are likely to suffer a revenue loss of $11.2 billion this year, putting 2.9 million jobs at risk as passenger demand falls by 47% due to the coronavirus crisis.

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.

"The opening up of the flights is a welcome move. It will ease the stress of the airlines. The second part of it in terms of regulating fares is it protects both consumers and is fair to airlines as well," said Jagannarayan Padmanabhan, Director -- Transport & Logistics, Crisil Infrastructure Advisory, adding that this practice however should not 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 added.

Source: https://www.livemint.com

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