India to restart international flights from March 27

The Indian government has decided to resume scheduled commercial international flights from March 27, taking into account the increased vaccination coverage across the world.

The suspension of scheduled commercial international passenger services to and from India, thus, stands extended only up to 2359 hrs IST on March 26, 2022 and air bubble arrangements shall accordingly be extended to this extent only, the Ministry of Civil Aviation said in a statement.

The resumption of regular international flights comes two years after the Directorate General of Civil Aviation (DGCA) suspended such operations with effect from March 23, 2022 due to the onset of the Covid-19 pandemic. The ban on scheduled international passenger flights was further extended "till further orders" on February 28.

The international operations shall be subject to strict adherence to the Ministry of Health & Family Welfare guidelines for international travel, the statement said. The ministry had earlier listed out 82 countries which have reciprocal arrangements to accept vaccination.

This comes at a time when aircraft fuel prices are at a record high. State-run oil marketing companies have hiked jet fuel prices five times this year amid soaring crude oil rates due to the ongoing Russia-Ukraine war.

Domestic air traffic recovers

In February 2022, domestic passenger traffic jumped around 19% sequentially to an estimated 76 lakh compared with about 64 lakh in January 2022, according to ICRA.

However, on a year-on-year basis, domestic passenger traffic dropped 2% last month compared with February 2021. Air traffic has plunged around 38% compared to the pre-Covid-19 levels.

ICRA continues to maintain a “negative” outlook on the Indian aviation industry. “The outlook reflects ICRA’s view that the financial performance of Indian airlines is likely to remain weak as recovery in domestic passenger traffic to pre-Covid levels is likely by FY2024, also the sharp rise in ATF prices, will continue to pose a major threat to the profitability of the airlines in the near term.”

Capacity deployment at India’s airlines for February 2022 was around 12% lower than February 2021. The Ministry of Civil Aviation had permitted 100% capacity deployment on domestic routes with effect from October 18, 2021.

The rating agency cautioned that low capacity utilisation of the aircraft fleet, combined with a sharp increase in ATF prices (up 57.4% YoY) will continue to weigh on the financial performance of Indian carriers in FY2022. The credit profile of most Indian carriers continues to be characterised by the weak liquidity position, it said.

ICRA expects industry earnings to be adversely impacted in FY22 due to lower revenues and higher ATF costs. The onset of the Omicron variant along with continued high fuel prices will delay the demand recovery in FY22. Debt levels are likely to remain high for the industry and are estimated to be at around ₹1 lakh crore (including lease liabilities) for FY22, with the industry requiring an additional funding support of ₹ 20,000-22,000 crore over FY22 to FY24, the report said.