Monday, August 10, 2020

India’s refusal to bail out airlines is putting them on the verge of collapse

For nearly a decade now, India’s aviation industry has survived despite experiencing one rough patch after another. But this time, the situation is so grim that if the Narendra Modi government does not step in to help the cash-strapped sector, it might be the end of some of its key players.

The Covid-19 outbreak followed by months of lockdown and the ensuing need for social distancing came to haunt India’s aviation industry at a time when it was already struggling with high fuel prices and massive tax burdens. In addition, the hyper-competition between a slew of low-cost carriers had made it hard for airlines to make much money as they lured potential customers with the cheapest fares.
During the suspension of flight operations between March 25 and May 25, some of the airlines lost between Rs75 crore ($11.2 million) and Rs90 crore ($13.5 million) per day, as per estimates from Mumbai-based credit rating agency ICRA. Even after the lockdown was lifted, airlines’ business did not pick up much as people continue to stay indoors.

Resultantly, the industry has witnessed a series of layoffs and steep pay cuts. In fact, regional airline, Air Deccan, has shut operations until further notice and put its employees on sabbatical without pay. There are reports that state-owned Air India is planning to send some of its staff on leave without pay for up to five years.

As airlines struggle to meet their day-to-day cash requirements, there is little hope to get bank loans or other investments because the near-term outlook for the sector is grim.
10/08/20 Niharika Sharma/Quartz India
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