Sunday, March 08, 2020

Could The Coronavirus Outbreak Impact Air India Sale?

The coronavirus is causing a substantial slowdown in the aviation market, with India feeling the effects even more this week. With the government pulling out all the stops to make the airline as lucrative as possible, could this put a damper on the efforts? Let’s examine what the airline has to offer and how the virus may affect its sale.
India has recorded 39 cases of the virus, with all but three coming in the last week. Air India is particularly exposed to the virus. The airline flies to Tokyo, Seoul, Milan, Hong Kong, and Shanghai. These are all cities that are at risk or have seen widespread outbreaks of the virus. In response, Air India has reduced the frequency on all these routes and cancelled the last two until July. With the virus now spreading in India, Air India could see its domestic business hurt too. Carriers like IndiGo have begun offering change fee waivers on all flights, an example that Air India might have to follow, causing more loss in demand and revenue.
The virus has already heavily affected the demand of Air India’s popular international routes, such as Seoul and Tokyo. Domestic cases might force Air India to trim down flights within India and possibly even ground some aircraft in its fleet.
One of Air India’s tactical advantages was its place in a fast-growing aviation market. However, a sustained effect of the virus could cause a slowdown in the market, making Air India a lot less lucrative. While the airline will still retain its large fleet and prominent slots at airports like Heathrow, without demand all of these advantages fall flat. The lack of demand might force buyers to take a closer look at Air India’s $3.2bn debt, a bloated staff, and grounded aircraft.
08/03/20 Syd Sharma/Simple Flying
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