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Indian Aviation Industry Braces For $3.6 Billion Loss, Looks To The Future
After halting international services into and out of the country, the Indian government announced Monday that it would suspend domestic passenger services starting March 25 in an effort to slow the spread of the novel Coronavirus across the country. Airlines were directed to halt their scheduled passenger operations after 11:59 p.m. on March 23 and all flights were told to “plan…to land at their destination” before then.
“The operations of domestic schedule commercial airlines shall cease with effect from the midnight that is 23:59 hours IST (Indian Standard Time) on March 24, 2020,” a Civil Aviation Ministry spokesperson said. “Airlines have to plan operations so as to land at their destinations before 23.59 hours on March 24, 2020.”
There is no indication of when this halt will end, though it will not be before the end of the 21-day nationwide lockdown announced on March 25. Dedicated cargo flights and services permitted by the Directorate General of Civil Aviation (DGCA) will still be allowed to operate. International services had originally been banned through March 29, though that was extended until at least April 14.
Since this announcement, airlines across India have been forced to park their entire fleets, often directly at the airports where they were located when the domestic travel ban went into place.
The Centre for Asia Pacific Aviation (CAPA) India projects that India’s aviation market will lose between $3.3 and $3.6 billion in the first quarter of Financial Year 2021 alone due to the effects of the coronavirus.
“India’s aviation sector could incur losses of $3.3-3.6 billion in 1QGY2021 assuming that all domestic and international operations remain grounded until June 30,” CAPA said in a statement. “Even with some partial resumption of services in May and June, the financial outcomes may not change significantly.
“The extension of the domestic lockdown until at least 15-Apr-2020 is the right decision by the Government of India. However, it has ensured that aviation will be seriously impacted by Covid-19. The April-June quarter, traditionally one of the stronger quarters of the year for Indian airlines, is increasingly looking like it will be a washout,” CAPA’s statement continued.
Airlines could lose up to $1.75 billion while airports and concessionaires could lose between $1.50 and $1.75 billion. Ground handling companies could lose $80-90 million. CAPA says that the aviation sector, which was vulnerable prior to the Coronavirus outbreak, was not structured to withstand even standard disruptions, let alone a once-in-a-century pandemic. CAPA says that the entire aviation supply chain in India will be affected.
“The entire sector is now in a state of crisis which will certainly impact FY2021 and quite possibly well beyond,” CAPA’s statement said.
CAPA is seeking “urgent” government intervention and coordinated industry response to ease the effects of the Coronavirus. Airlines across the country have taken different steps to keep as many aircraft flying as possible and to help the Indian government combat the pandemic. IndiGo offered its “resources, aircraft and crew” to the Union Aviation Ministry to transport medicine, equipment, and relief materials across the country.
“In an endeavour to support the Government of India, IndiGo, India’s largest airline, today has offered its resources, aircraft and crew to assist the nation in the worldwide battle against coronavirus,” IndiGo said in a statement. “The airline has expressed support to contribute in the ferry supply of medicine, equipment, and relief samples from one part of the country to another.”
“I know you must be facing major logistical challenges in moving medicine, equipment and relief supplies from one part of the country to another. We at IndiGo would be extremely proud to be associated with this critical life-saving activity at this hour of great need for our nation,” IndiGo CEO Ronojoy Dutta said. “Please be assured that all our employees are highly motivated in the service of this country and are eagerly looking for opportunities in which to contribute. We would consider it an honour if you would engage us in this activity.”
Other carriers have converted passenger planes into makeshift cargo aircraft to transport goods into, out of and across India.
“At least for the short term, as long as passenger flights are disrupted, cargo operations are expected to help some airlines make up for some of the losses,” said Um Kyung-a, an analyst at Shinyoung Securities Co. in Seoul, in response to a growing global trend of using passenger aircraft for cargo services. “With oil prices falling and higher rates, it’s become economical for some airlines to be using passenger planes for cargo.”
Like other markets across the world, CAPA says that India’s aviation market could look very different after the Coronavirus pandemic slows down. It says that a number of airlines, suppliers, and airport-owning companies could shut down due to the financial stresses of the Coronavirus. India will need a greater number of resources to continue on its trend of becoming among the largest aviation markets in the world.
“Although it is too early to come to a firm conclusion, what emerges on the other side may be a smaller, consolidated industry,” CAPA said.
India will also probably see a change in aviation regulation that, though bad for airlines and other companies in terms of competition, could ultimately help the industry prepare for a crisis like this in the future.
“These days the challenge is not really the technology, the challenge is the regulations, and, in case something goes wrong, who’s going to take the responsibility?” a top human relations executive at an Indian IT firm told Reuters.
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