Thursday, December 31, 2020

How 2020 played out for the pandemic-hit Indian aviation sector and what lies ahead

The COVID-19 pandemic had a massive impact on the Indian aviation sector in 2020 and major airlines facing losses and challenging times laid off employees, sent them on leave without pay, or cut their salaries. The government also had to extend the deadline for submitting bids for Air India five times during the year.

The effect of this disruption can be gauged by the loss figures of India's two largest airlines. IndiGo incurred net losses of Rs 2,884 crore and Rs 1,194 crore in Q1 and Q2 of this fiscal respectively. SpiceJet posted net losses of Rs 600 crore and Rs 112 crore in Q1 and Q2, respectively.

Global PE fund Blackstone-backed IBS Software expects a faster growth in its business on the back of increasing digitisation in aviation, tourism and hospitality sectors amid the coronavirus pandemic, its founder and Executive Chairman V K Mathews said. The clients include Emirates, Etihad Airways, Qatar Airways, Korean Air and British Airways. It has also provided its flight operations and crew management service to the erstwhile Kingfisher Airlines and now-defunct Jet Airways in India. He said COVID-19 will accelerate growth as the companies are expected to invest more in technology in the wake of digital transformation.

The pandemic is likely to have a longer impact on international air travel as compared with domestic flights (which are operating at 80% capacity) due to the closure of international operations and airports. India now has air transport bubbles with 23 countries. The international sector, down by 80-90% from pre-Covid level, is expected to grow only marginally. Industry experts do not see profitability returning until the end of 2021.

“If not for any unforeseen geopolitical event, 2021 will be better than 2020, when we hit rock-bottom,” says CEO of aviation consultancy CAPA India, Kapil Kaul. “With an unprecedented impact across the aviation value chain, speed of recovery will be determined by the pace of events in the next 3-4 months.” Key factors that will determine the pace of recovery in the domestic market are development and availability of vaccines, people’s willingness to undertake leisure travel and recovery in macroeconomic growth. Indian aviation is expected to report losses of $4 billion in FY21. And with carriers continuing to bleed cash at least until the Q4 of FY21, next year will continue to be painful.

31/12/20 Economic Times

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