Airlines say lack of direct relief may cause downsizing of sector

Indian airlines seeking a comprehensive bailout package said the Centre’s stimulus moves will give little relief considering the fleets are grounded and daily losses are mounting due to the lockdown.

Indian airlines seeking a comprehensive bailout package said the Centre’s stimulus moves will give little relief considering the fleets are grounded and daily losses are mounting due to the lockdown. “We needed government support to survive the lockdown and further support to revive the sector after the lockdown is lifted,” said a New Delhi-based senior airline official, who requested anonymity. “Right now we have received neither.”

The clampdown on Indian aviation began in mid-February with a ban on flights to and from coronavirus-hit countries.(AP file photo)

The clampdown on Indian aviation began in mid-February with a ban on flights to and from coronavirus-hit countries. Thereafter, India suspended all domestic and international commercial flights on 25 March when the lockdown was imposed.

Since then, the lockdown has been extended thrice, forcing airlines to cancel bookings till at least 31 May.

As part of measures to revive the stalled economy, the government announced plans to privatize more airports, free up more airspace for civilian flights and cut taxes to make India an attractive centre for maintenance and repair of aircraft. But, this has left airlines unimpressed.

“The three sops doled out do not have anything direct for the airlines. A couple of countries have helped airlines in the form of soft loans of funding in exchange of a minority stake in the airline,” said independent aviation analyst Ameya Joshi, also the founder of NetworkThoughts.

In a letter written by Ficci’s aviation committee chairman, Anand Stanley, to aviation minister Hardeep Puri, the industry had asked for tax relief, deferment of payment of GST for airlines, bringing jet fuel under GST, reduction in airport charges and overflight fees, taxing passengers on security, temporary reduction of excise duty on fuel and financial aid to the sector. He sought direct cash support for Indian airlines for their fixed costs.

The industry was also looking for an easing of requirements for airlines to operate flights on remote and loss-making routes and a freer hand in pricing of tickets. But industry officials said none of these proposals have come through.

While the measures may be positive in the long term, what airlines want right now are direct relief measures, said an aviation report by ICICI Securities.

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.

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.

“One challenge for private airlines in India is that these airlines have nearly all borrowings in forex (by way of foreign aircraft leases or foreign Exim-backed loans) and have little collateral to offer for new loans (as they own a low percentage of aircraft, which are anyway mortgaged) and typically have negative working capital and hence they may have difficulty in raising unsecured debt from the Indian banking system to tide over these Covid problems,” said EY India transactions partner Kuljit Singh.

India’s aviation sector, including airlines, airport firms, ground handling companies and airport retailers, is expected to post losses of $3-3.6 billion in the June quarter, according to aviation consultant CAPA India. “There is no relief likely and medium- to long-term downsizing of the aviation industry is inevitable unless promoters are able to recapitalize,” said Kapil Kaul, South Asia CEO of CAPA-Centre for Aviation.