June , 2020
Urgent need of government support for aviation sector
23:55 pm

Aritra Mitra

The aviation industry is one of the worst affected sectors because of the lockdown. Industry insiders claim that the pandemic has reversed its growth trend, which was about 11% per annum. It will take at least six to eight quarters to reach the pre-pandemic level. An executive from an international airline posted in Kolkata spoke to BE on the challenges faced by the aviation sector because of the lockdown. She said, “The entire aviation sector came to a standstill due to the lockdown. The tickets were cancelled and no revenue was generated. Moreover, the airlines had to bear some extra costs. For instance, the employees of the airlines who were stuck in foreign countries and could not return due to the sudden announcement of the lockdown, had to be taken care of by the airlines. Internationally, several airline companies went out of business.”  

Condition of the sectorC

Crisil reported recently predicted that during this fiscal, losses for this sector will amount to around `25000 crore. According to industry insiders, for the Indian carriers, the first quarter is the strongest period while the second quarter is relatively a weak quarter. There is an anticipation that the dynamics of the aviation sector will gradually improve from the third quarter of FY21.

The report further stated, “Airlines will be worst affected, contributing 70% of the losses, or about `17000 crore, followed by airport operators with `5000-5500 crore and airport retailers with (including retail, food, beverages and duty-free) with `1700 crore.”

Jagannarayan Padmanabhan, Director and Practice Leader, Transport & Logistics, CRISIL Infrastructure Advisory, told the media, “These are preliminary estimates and aggregate losses could increase if this lockdown is extended beyond the first quarter. As and when operations resume, overall operational capacity will hover at 50-60% for the rest of the fiscal. Consequently, mergers and acquisitions of airlines, and relook at expansion plans of private and upcoming greenfield airports would be possibilities.”

Distressed employees

The losses incurred by the aviation sector has adversely impacted the employees. There have been lay-offs in the sector since the lockdown and severe salary cuts. According to a report by theIndian Air Transport Association (IATA), 29.32 lakh jobs in the aviation sector is currently under threat. India’s largest domestic airline, IndiGo announced pay cuts ranging from 5% to 25% for the senior employees. Earlier, the company had imposed a no-pay-leave programme for the employees.  IndiGo sources stated that the airline company has been planning to restore the original salaries of the employees by the end of this financial year. SpiceJet in a press statement stated that they have decided not to lay off any employees. However, with their revenue sources dried up, 92% of SpiceJet employees will have to undergo a cut in their salaries.

Government support

At a time when the aviation sector is facing an unprecedented crisis, the primary responsibility falls upon the government to make this sector functional again. In the recent economic package, a few initiatives were announced by the Finance Minister (FM) Nirmala Sitharaman for the civil aviation sector. The FM announced relaxations on the restrictions for the utilisation of the Indian air space for effective functioning of civil flights.  She further announced that the Airports Authority of India has given three airports out of six to bid for operation and maintenance on a Private-Public-Partnership (PPP) basis. Additionally, it is expected that the investment by private players in 12 airports in first and second rounds will be around `13,000 crores.

Despite the announcements, industry insiders are not satisfied as their expectation of a financial package for the sector has gone unaddressed. They are of the opinion that the long lockdown has done away with the capital for most of the airlines, so an immediate liquidity infusion was the need of the hour.

Partial service opening and aftermath

With relaxation of the lockdown, there has been partial opening of the service with stringent measures of social distancing and security checks. The airline executive informed that due to social distancing, the number of passengers has been reduced and as a result, the ticket fares have been raised. She further added, “At present, the international flights are running only for relief purposes and people are not allowed to travel to foreign countries except in cases of emergencies.” Also, people are sceptical to fly abroad because of the quarantine policies of the respective governments.

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