IndiGo, Air India, SpiceJet, Vistara — how airlines cope with Covid

Even as the threat of the new Omicron variant looms large and a minor panic grips India, air traffic has remained more resilient than it did in earlier waves. Industry sources said that while the traffic numbers in December have been more muted than usual even when compared to the last week of November, things were stable and not appearing in imminent danger of a collapse as of now.

Since the reopening of domestic aviation in May 2020 after the initial two-month hiatus, the government has regulated the number of flights airlines can operate on domestic routes to prevent overheating of the sector. Initially, the cap on number of flights was 33% of the pre-pandemic schedule, and this was gradually increased to 80% till the second wave of Covid-19 hit. After that the government had reduced it to 50% and then relaxed it to 60%, 72.5%, 85%, and since October 2021, it has completely removed the restrictions.

The airlines have gradually reintroduced aircraft and capacity and a broader picture of how things stand can be gauged from the chart below. A total of 2,997 flights (including international) using 506 aircraft of the combined fleet of 658 aircraft as per the air operator’s certificate (AOC) were operated on December 22 by Indian airlines as per data by the Directorate General of Civil Aviation (DGCA). According to Ministry of Civil Aviation (MoCA) sources, when demand is high or not suppressed as at present, almost the entire fleet of 658 — give and take a few — would be in use.

“The lower usage of the fleet is either due to the lack of demand and the players being wary of bringing in their entire fleet or because some aircraft are not fully operational due to lack of spares or engineering related glitches”, said a top MoCA official on the condition of anonymity, adding that if demand was back to normal, a minimum of 600 plus aircraft would be in active use.

The ability to rebound for airlines is evident from two factors. One, how much of their existing capacity they are utilising and to what extent. If for any airline, a substantial portion of the fleet remains grounded, it can be one of two reasons. One, the airline is unable to get some planes in flying condition due to a shortage of spares and parts, usually indicative of a tight liquidity position. Second, it could be underutilising the fleet due to a perceived lack of demand. No point getting all aircraft all dressed up with nowhere to go! Both factors — fleet utilisation and the intensity of it — give a pretty good indication of how the carrier is coping post the Covid-19 crisis.

A closer look of the individual airlines gives a further insight on how the players are faring and coping post the two Covid-19 waves. As this went to press, the country’s largest airline IndiGo — which as per DGCA’s latest quarter market share data accounts of 57.1% of India’s total domestic traffic — had started utilising its entire fleet of planes (280 in total, including 140 A320neos, 60 A320ceos, 46 A321neos and 34 ATRs) although utilisation was 12.5 hours instead of 13.5 hours a day. To get to the more coveted 13.5 hours (airline economics is determined by the ability to utilise one’s assets to the maximum), IndiGo needs scheduled international flight operations to normalise. Bubble flights and charters were using some of its available international capacity but not quite enough, a top Indigo official confirmed.

Keeping IndiGo company in utilising almost its entire fleet was the baby of the pack, AirAsia India with a market share of 4.9% (third quarter 2021) and a fleet of 28 planes, of which 27 are up in the air (one was undergoing C checks). It was however using its aircraft less than it was in the pre-Covid-19 era. That alone might partly explain the sharp rise in losses that the airline recently registered according to media reports: ₹1,532 crore for FY 2020-21 versus ₹732 crore for the previous year.

The other airline in the Tata stable, Vistara, is now operating at higher than Covid-19 levels in both capacity and number of departures, with 52 aircraft in its current fleet which will be going up to 54 by the end of March 2022. The airline however declined to divulge specifics on average utilisation. It did narrow its FY 2021 loss from the previous year but the jury is out on whether this was mainly on account of foreign exchange gains, a tighter rein on costs or greater efficiencies all round. The airline said that renegotiating with vendors and new avenues of revenue like cargo and international charters helped bolster its earnings. The comfort factor for the airline remains that the founders have not shied away from bringing in much needed capital and keeping the airline’s head above water. As per DGCA data accessed by this writer, the airline did 224 flights on December 22 using 45 of its 52 aircraft on AOC (air operator’s certificate).

SpiceJet, the third largest in size and market share pre-pandemic has been rapidly shrinking (8.7% market share in third quarter) and is currently utilising around 65-70 of its 95 aircraft with utilisation hours claimed to be roughly the same as pre-pandemic levels. The airline has been stressed financially and this is showing not just in the dues it has piled up but also in the urgency with which it is trying to replace its older B737s with the Max. It has totted up book losses of ₹2,300 crore since the start of the pandemic (March 2020) which it is now trying to reduce through a series of initiatives. Time will tell how successful it is. But one thing is clear: the rebound for SpiceJet as of now is not all smooth and it is emerging more wounded than its better capitalised rivals. As per DGCA data, on December 22, Mumbai-headquartered Go First did a total of 271 flights using 46 of its aircraft from a fleet of 59 but details on the aircraft's average daily utilisation were not available as an email seeking the same from the company remained unanswered.

Perhaps the biggest loser or the one trailing most others in some sense remains Air India although this could change quite rapidly once the Tata Group takes charge. The airline went into the pandemic with a total fleet of 146 aircraft in total (121 aircraft in Air India and 25 B737-800NGs with Air India Express). Almost 18 of the Air India's narrow and wide-body aircraft fleet were grounded even pre-Covid-19 for one reason or the other. Fifteen old A320Classic were awaiting deregistration by DGCA as per the EOI document issued by the airline in January 2021, pre-sale. Sources said that Air India is currently utilising only around 80 of its 121 aircraft — this includes around 50 narrow bodies (A320s) and 27-odd wide body aircraft. The utilisation figure varies between 12-13 hours a day, which by Air India standards is pretty good. The airline refused official comment but a few senior management sources said that more of the fleet would have been up and running if the airline had not faced a cash crunch and it could afford all the spares and expenses related to keeping the fleet in good shape. Post the final transfer to the Tatas — expected by the end of January — it is likely more of the fleet will be in shape to fly. How much of the fleet it can immediately deploy will depend on a range of factors, not least of which is whether scheduled international operations normalise (as of now, this has been pushed to end January 2022).

Faring better than Air India is its low cost arm, Air India Express. It has 24 aircraft up and running (one aircraft was grounded post the Calicut incident) and current aircraft utilisation is around 12 hours on an average. By summer, it hopes to touch 14 like pre-Covid-19.

As per DGCA data on December 22, Air India operated 77 aircraft and did a total of 330 flights (including international) out of a total fleet of 123 aircraft. In other words, 46 aircraft were not used on the day, either due to the unavailability of the planes due to maintenance and spares issues or due to the lack of demand. Alliance Air however did a 100 flights with 14 of its fleet of 18 aircraft, as per DGCA.

Looked at from a macro angle, the rebound of air traffic has been reasonably good but air traffic growth that would have occurred had the pandemic not taken place has definitely taken a hard beating. At a micro level, the picture is as expected: some players have coped better and recovered faster than others. Analysts, experts and observers say that as we head into 2022, the lessons learnt from this extended episode are likely to stay and hopefully produce a more resilient industry for the future.