Aviation industry may take a big hit: Govt note
Domestic and international air traffic to and from India may decline by at least 50% in the current financial year because of the Covid-19 pandemic, causing significant job losses and force some airlines to ground aircraft to tide over the situation, according to an official note reviewed by Hindustan Times on Monday.
Meanwhile, the tourism ministry has cited Confederation of Indian Industry (CII) estimates to suggest that the loss of revenue to tourism can range between Rs 72,000 crore and Rs 1.58 lakh crores in 2020-21. According to the ministry, branded hotels will take the biggest hit in the tourism sector, followed by tour operators.
The civil aviation ministry’s note also stated that the sector and its stakeholders were focusing on reforms for a sustainable, safe and efficient revival of the aviation industry. The government suspended domestic and international flights in March to control the spread of the coronavirus disease pandemic; they have since resumed in a limited way.
India, which witnessed double-digit growth in air traffic before the Covid-19 pandemic, is staring at “a significant hit on airline and airport revenue,” the official note said.
Based on the preliminary estimates by airlines,the sector may be set for a reduction of 50-60% in international traffic and up to a 50% drop in domestic traffic, the note said. It also added that “there might be a significant but temporary loss of both direct and indirect jobs in the sector.”
It also estimated that due to such losses, “it is also likely that some aircraft may have to be grounded” and “a significant reduction is also expected in the air cargo handled at airports across India.”
India has two full service airlines, Air India and Vistara, apart from budget carriers IndiGo, SpiceJet, GoAir and Air Asia. Apart from these airlines, there are some small airlines that, along with Indigo, operate on routes under the Udaan scheme, meant to improve regional air connectivity and make air travel affordable to the masses..
Kapil Kaul, CEO of aviation consultancy Centre for Asia Pacific Aviation (CAPA) - India, said: “The entire civil aviation sector is at a breaking point. CAPA expects domestic traffic to decline by over 60% and international traffic by 70-80 % in financial year 2021. Work force impact is likely to be over 30% for the entire aviation sector. Airlines are expected to have around 250 surplus aircraft in the current financial year. We expect the industry to see pre-Covid traffic only by the end of financial year 2023.”
According to aviation regulator Directorate General of Civil Aviation, domestic air passenger traffic slumped 82.3% in July compared with the same month a year ago. From January to July, airlines carried a total of 37.28 million passengers, a decline of 54.84% compared to the corresponding period a year ago.
The aviation ministry has restarted domestic flights in many major routes and while scheduled international flights are still not allowed, it has created bilateral travel bubbles and allowed special repatriation flights both by Indian carriers and foreign airliners to carry stranded citizens back home.
At present the centre has allowed only 45% capacity utilisation on domestic routes. Domestic flights were allowed to resume from May 25, two months after a blanket suspension since the first lockdown was announced. The Centre has also extended the suspension of international flights until August 31.
“Traffic projections will depend entirely on the behaviour of the Covid-19 disease. Our traffic footfall is slowly picking up each month now since the lockdown (ended). As on August 16, there were 947 departure flights ferrying 93,639 passengers. Comparing the numbers from July 16 where there were 783 departure flights ferrying 61,772 passengers, there has been a big improvement . We are expecting it to pick up significantly over the next two three months,” civil aviation ministry spokesperson Rajeev Jain said.
The ministry’s note added that greater clarity will emerge in the next few months; and that the potential impact of Covid-19 on the aviation sector will depend on the intensity, duration and spread of the viral disease.
According to credit rating agency CRISIL, Indian airlines will face a revenue loss of Rs 1.3 lakh crore between fiscal 2020 and 2022 because of the pandemic. According to the International Air Transport Association (IATA), airlines in the Asia-Pacific region will be the hardest hit by the health crisis, with losses expected to be around $29 billion for 2020. This is more than a third of the $84.3 billion industry losses globally.
For India alone, IATA expected passenger demand in 2020 to shrink by 49% compared to last year. The potential impact on employment in the aviation and sectors dependent on it could be to the tune of 3 million jobs.