Covid-19 batters Indian airlines

With the Covid-19 pandemic showing no signs of retreating, India’s aviation sector is flying on a wing and a prayer. The industry has been battered with India’s top airlines reporting huge losses in the first quarter of the ongoing fiscal.

After IndiGo—the biggest airline in the country—reported a staggering loss of ₹2,844.3 crore in the April to June period, rival SpiceJet, on Tuesday, reported a loss of ₹593.4 crore in the same quarter. Both IndiGo and SpiceJet had reported profits of ₹1,203.1 crore and ₹261.7 crore, respectively, in the corresponding quarter a year ago.

More worrying for SpiceJet is that on the back of its current quarterly loss, the company’s net worth has fallen further—from a negative net worth of ₹1,579 crore in FY20 to a negative net worth of ₹2,170 crore, as on June 2020. Such a situation, according to the company’s auditor, S.R. Batliboi & Associates LLP, “indicates the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern”.

It is to be noted that flight operations were suspended for the most part of the quarter under review and domestic operations were only partially resumed on May 25. “The weak demand thereafter was a reminder of the significant problems that this pandemic has resulted in,” said SpiceJet chairman and managing director Ajay Singh in a statement on Tuesday.

Scheduled international flight operations, though, continue to remain suspended in the country till September 30. “This is the worst-ever crisis to hit the aviation sector,” Singh added.

The International Air Transport Association (IATA) estimates that the global aviation industry is staring at a loss of $84.3 billion, with the financial viability of many airlines coming into question. According to the IATA, the July 2020 (global air passenger) traffic was 79.8% below 2019 levels, while international traffic was 91.9% below 2019 levels.

The world over, as various government policies such as closed borders, travel restrictions, and quarantines continue to annihilate travel demand, the IATA has called on governments “to work together to urgently find ways to re-establish global connectivity by re-opening borders and to continue with relief measures to sustain airlines during the Covid-19 crisis”.

“Protecting their citizens must be the top priority of governments. But too many governments are fighting a global pandemic in isolation with a view that closing borders is the only solution. It’s time for governments to work together to implement measures that will enable economic and social life to resume, while controlling the spread of the virus,” said Alexandre de Juniac, IATA’s director general and CEO.

In India, some international air operations have resumed and are part of the “air travel arrangements” that have been signed with countries like the U.K., the U.S., and France. According to the Ministry of Civil Aviation (MCA) these “are temporary arrangements between two countries aimed at restarting commercial passenger services”.

On the domestic front, MCA has allowed airlines to operate 60% of their capacity as against the earlier 45% capacity utilisation limit. MCA had said that over 120,000 passengers took to the skies across the country on September 1, an indication that domestic flight operations are on the rise.

“I am confident that as more and more states (in India) ease travel restrictions and business activity gets back to normal there will be a significant improvement in the operating environment for airlines,” said SpiceJet’s Singh. “We are witnessing some early encouraging signs towards recovery.”

However, given the alarming rise in the number of Covid-19 cases and deaths across the country, the Indian aviation industry is far from being out of the woods.