India's aviation industry will be badly hit by the current national lockdown, which started on 25 March, when all domestic and international air travel was suspended as a containment measure to mitigate the spread of the coronavirus or COVID-19, say aviation experts. Domestic travel resumed on 25 May on a limited scale.
Global research and analytics firm CRISIL, in a recent report, estimated the aviation industry would “crash-land this fiscal” with a revenue loss of between $3.19 billion and $3.3 billion. Airlines will be the worst-hit, contributing more than 70 percent of the losses, said CRISIL.
“The international aviation industry is in turmoil now. The Indian aviation industry cannot remain detached. Smaller airlines would find the going difficult in the absence of cash flow, if the current situation continues longer. In such a scenario, they would find it difficult to survive, forcing closure. There may be mergers, amalgamations, and bankruptcy too. It is impossible to predict, which one would go what way", said M.P. Vijayakumar, former member of the regulatory body of aeronautical services, the Airports Economic Regulatory Authority of India.
Vijayakumr said the fall out from the current lockdown is manifold. First, the airline market has no inventory like FMCG or cement – the only inventory is bookings, which may vary. Second, its demand is a derived one, such as that from business travellers and tourists. Third, it is a highly capital intensive industry.
“A lot of investments go into the airline industry, by its very nature. When the assets are lying idle, it bleeds the industry because your expenses are still continuing without any revenue. Almost 60 percent of the cost is fixed costs which the airlines are still incurring", Vijayakumar added.
During the current lockdown, most people started working from home. This trend had started before the coronavirus outbreak. Now if distance engagement in business becomes a permanent trend, it will bring down business travel, he added.
India was the third largest and fastest growing aviation market in terms of domestic tickets sold. But if the current restrictions continue on air travellers, it will dampen domestic travellers, who will use their discretion more often, said Vijaykumar.
India has 91 international carriers – five Indian and 86 foreign. The Indian market was expecting exponential growth in the coming decade, while freight traffic at Indian airports was expected to cross 11.4 million tonnes by 2032 and passenger traffic to 520 million by 2037, according to the Airports Council International, a global trade representative of world airport authorities.
Unlike several western countries, the market in India has the potential for growth. The revenue passenger kilometre (RPK) in domestic airline was 18.6 percent, almost three times the global RPK growth of 6.5 percent, according to industry estimates.
At present there are 138,845 COVID-19 cases in the country, including 57,721 recoveries and 4,021 deaths.
The views and opinions expressed in the article do not necessarily reflect those of Sputnik.