With two-cent airfares, high fuel costs and taxes, India’s aviation market already was one of the toughest around. The coronavirus pandemic could be the final straw for some of the country’s airlines.
Indian carriers need as much as $2.5 billion to keep flying, CAPA Centre for Aviation in Sydney says, and that may only last to the end of this year if they’re lucky. Airlines suffered a total collapse in demand from March 25 to late May as India banned commercial passenger flights as part of its virus lockdown.
Governments in Europe, the U.S. and elsewhere have provided $123 billion to support airlines through the Covid-19 crisis. But Prime Minister Narendra Modi’s administration, facing a widening fiscal deficit, hasn’t doled out funds to individual industries or airlines backed by private businesses and, in some cases, billionaires.
The country’s airlines need significant investment or one or more will fail, said Satyendra Pandey, an independent consultant and former head of strategy at Go Airlines India Ltd. That puts them on track to follow the likes of Flybe Group Plc in the U.K., Virgin Australia Holdings Ltd. and Latam Airlines Group SA in Chile into administration or collapse. Grupo Aeromexico SAB, Mexico’s second-largest airline, said Tuesday it filed for bankruptcy in the U.S. “Airlines with weak balance sheets and inadequate collateral have survived by withholding payments to suppliers for two months and counting,” Pandey said.
The Indian aviation market was challenging enough before the pandemic as crushing fare wars and high costs took their toll. There were two major collapses in the last decade: Jet Airways India Ltd., the country’s oldest private-sector carrier, and Kingfisher Airlines Ltd., which was owned by Vijay Mallya. Air India Ltd. has been limping along under a mountain of debt for years searching for a buyer. In addition to Indian states imposing levies of as much as 30% on jet fuel, a weakening rupee adds to the pain. The currency has fallen nearly 10% against the dollar over the past year, the weakest in Asia, which hurts Indian airlines as their costs are mostly dollar-denominated.
“We haven’t given a financial bailout package, but that doesn’t mean the government has not been helping the aviation sector,” said Pradeep Singh Kharola, the top bureaucrat in India’s aviation ministry. “The help can be in various ways.”
01/07/20 Anurag Kotoky/Bloomberg|Quint
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Indian carriers need as much as $2.5 billion to keep flying, CAPA Centre for Aviation in Sydney says, and that may only last to the end of this year if they’re lucky. Airlines suffered a total collapse in demand from March 25 to late May as India banned commercial passenger flights as part of its virus lockdown.
Governments in Europe, the U.S. and elsewhere have provided $123 billion to support airlines through the Covid-19 crisis. But Prime Minister Narendra Modi’s administration, facing a widening fiscal deficit, hasn’t doled out funds to individual industries or airlines backed by private businesses and, in some cases, billionaires.
The country’s airlines need significant investment or one or more will fail, said Satyendra Pandey, an independent consultant and former head of strategy at Go Airlines India Ltd. That puts them on track to follow the likes of Flybe Group Plc in the U.K., Virgin Australia Holdings Ltd. and Latam Airlines Group SA in Chile into administration or collapse. Grupo Aeromexico SAB, Mexico’s second-largest airline, said Tuesday it filed for bankruptcy in the U.S. “Airlines with weak balance sheets and inadequate collateral have survived by withholding payments to suppliers for two months and counting,” Pandey said.
The Indian aviation market was challenging enough before the pandemic as crushing fare wars and high costs took their toll. There were two major collapses in the last decade: Jet Airways India Ltd., the country’s oldest private-sector carrier, and Kingfisher Airlines Ltd., which was owned by Vijay Mallya. Air India Ltd. has been limping along under a mountain of debt for years searching for a buyer. In addition to Indian states imposing levies of as much as 30% on jet fuel, a weakening rupee adds to the pain. The currency has fallen nearly 10% against the dollar over the past year, the weakest in Asia, which hurts Indian airlines as their costs are mostly dollar-denominated.
“We haven’t given a financial bailout package, but that doesn’t mean the government has not been helping the aviation sector,” said Pradeep Singh Kharola, the top bureaucrat in India’s aviation ministry. “The help can be in various ways.”
01/07/20 Anurag Kotoky/Bloomberg|Quint
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