Covid-19 hit aviation sector hard, domestic passenger footfall at lowest in decade

The coronavirus pandemic has pushed the domestic passenger traffic across the country to a decadal low, even as daily flights from Mumbai are currently down to numbers seen during the first wave in May and June 2020

The coronavirus pandemic has pushed the domestic passenger traffic across the country to a decadal low, even as daily flights from Mumbai are currently down to numbers seen during the first wave in May and June 2020. Domestic traffic in the financial year ending March 2021 was 53.4 million passengers, the lowest since 2010-11 when domestic air operators flew 53.8 million passengers on national routes.

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“We were seeing 650 flight movements until April as the traffic had started to pick in both domestic and international sectors. However, due to the sudden rise in Covid-19 cases in the country we have gone back to May-June’s traffic last year and are handling just around 200-250 flights daily,” a Mumbai airport official said, on condition of anonymity.

By comparison, the Chhatrapati Shivaji Maharaj International airport Mumbai handled an average 950 daily flights even as recently as 2019 before the pandemic hit. The domestic traffic in 2019-20 was 274.50 million, as per data made available by rating agency ICRA.

The sector was showing signs of recovery as airlines clocked around 60-70% seat occupancy by the end of 2020, after all flights were stopped in March at the start of the pandemic, and domestic flights were allowed to resume only after two months. However, figures provided by the Directorate General of Civil Aviation (DGCA) show that domestic traffic in February 2021 registered a mere 1% growth over January, with the capacity (number of flights deployed by the airlines) static at 71% in both months. In April, domestic air traffic declined by 29% from March, while there was a 15% fall in capacity between the two months.

“The first half of this fiscal will be a washout. Till there is a very aggressive focus on vaccination, job losses are inevitable as demand is frozen with nearly 400 plus aircraft on ground in the first quarter,” said Kapil Kaul, chief executive officer of Centre for Asia Pacific Aviation (CAPA), India, an aviation advisory and research think tank.

Part of the reason for the depressed numbers is the continued ban on international flights, which began in March last year and was recently extended to May 31. However, starting April 2020, cargo and DGCA approved flights began to take off. Nevertheless, international traffic has declined by over 90% due to the absence of regular overseas flights. India made bilateral air bubble arrangements with 28 countries, although recently some countries like Hong Kong and Australia announced restrictions on flights to India after a surge in cases was reported from here.

Maharashtra’s case trajectory began to register a surge starting February, and by March-end, it contributed to as much as 60% of the country’s caseload and continued to remain the most affected state in the country till April-end, Union health ministry figures pointed out.

When flights were allowed again on May 24, the average load factor (the total seat occupied in an aircraft) was 5%, which gradually increased to 60% -70% by October-November. This year too, passengers are wary of flying, which has forced airlines to cancel flights across the country: most airlines have dropped pre-March schedules by almost 40%-50%.

SALARY CUTS, JOB LOSSES

“Pre-Covid we were on average flying around 70-80 hours per month which came down to zero for a brief moment and then reached about 50 hours around July to September last year. We have not reached the same hours as pre-Covid till now,” said one pilot from Indigo airlines, requesting not to be named.

The pilot, with about eight years of experience with three airlines, said that there were two main reasons for reduction in hours: fewer passengers leading to cancellation of flights and a high number of pilots and crew getting infected with Covid-19. This pilot also contracted the disease last month.

“Airlines fear that people will neither travel for leisure nor for meetings, incentives, conferences and exhibitions in 2021. They believe that new virus strains, quarantine rules prevalent in states across the country and other factors will have an impact on the industry. The most important quarter for the domestic market is the first quarter, and in 2021, this seems to be a wash out already. But it’s better than last year where operations were shut for two straight months,” said Praveen Iyer, a former senior executive from Jet Airways. The current fiscal will witness a loss, he said.

“All airlines except Indigo will struggle to manage their cash position. As far as employees are concerned, the worst is over. Lay-offs are doubtful, but salary (including incentives/ allowances) cuts that are already in effect may continue,” Iyer said.

With deeper pockets than its competitors, Indigo has retained most of its pilots even though there was a cut of around 10% in each department. In May last year, the company made a salary cut of 15% and then there were 10 days per month without pay till November which took the proportion of the cut to almost 45%. However, in November, the company stopped sending its personnel on 10 days a month without pay but increased the salary cut to 28% which remains in force till this day.

SpiceJet air crew members floated an online petition a day after the low-cost carrier slashed salaries up to 50% in April for all employees. In the petition, the signatories claimed that many were also underpaid as they worked through the pandemic. Earlier this month, the CEO of GoAir wrote to the employees stating that the plan to restructure their pay was on hold due to the surge in cases, which has “impacted overall operations and reduced flying capacity,” a report in the Hindu BusinessLine newspaper stated.

However, experts said that if the current situation persists, more job losses are imminent in the aviation industry.

“Most of us had restarted recruitment with the improvement seen in the last four months,” said Murali Ramachandran, chief executive officer of Celebi Aviation Holding, India, a ground handling agency.

“It is (job losses) already happening and will continue to happen for the next several months, because it’ll take a while for air travel to come back again. But again, just like the last time, the stronger airlines continue to take a very different approach to their employees compared to the less efficient airlines and I expect to see that differentiation to continue,” a former top airline executive, who has worked for both international and domestic airlines, said.

RECOVERY TARGETS

“We don’t have uniform rules related to international resumption beyond bubbles as yet and it may take longer to bring it into place,” Kaul said. International traffic is expected to be back to pre-Covid times by 2023-24, he said. Other experts Hindustan Times spoke to also proffered a similar timeframe for recovery: the second half of 2022 for domestic traffic, and longer for international travel.

The airline executive quoted above explained that this would be so because of the differential vaccination regimes of different countries. “I think we’ll have to get to a situation where there’s a health passport, vaccination certificates, etc and so you’ll see things picking up. But as there’ll be different parts of the world that will be vaccinated at different times, I think it’s going to be until sometime, maybe the second half of 2023 before the globe as such feels more comfortable with international travel.”

An executive associated with the Association of Private Airport Operators said that the airports maintain asset intensive infrastructure despite the fall in air traffic. Private airport operators need to pay the Airports Authority of India as part of joint ventures. More than half of their revenue comes from non-aeronautical parts such as landing-parking charges and retail outlets, he explained.

“Our fixed costs are almost 80% of the total costs, as far as airports are concerned. So our fixed costs are very high, unlike airlines or any other stakeholders, we are in a very bad situation. They (the airlines) can cut costs, by reducing fleet strength but airports don’t have that kind of adaptability. Now non aero revenue has almost gone to 5% or 10% of the pre Covid levels also because the retail business at airport too is negligible as a result of which the retail outlets are unable to pay rents,” he said.

(WITH INPUTS FROM SHARAN POOVANNA)