Saturday, December 25, 2021

Why Omicron will delay recovery in India's aviation sector

New Delhi: The Omicron variant of the coronavirus has not only delayed the resumption of international flight operations, but it can also derail recovery of the domestic aviation sector, with smaller airline companies at a much higher risk, according to a report by Edelweiss Securities.

Financially, Indian airlines will continue to remain weak since any material recovery in passenger traffic to pre-Covid levels is expected to be gradual due to continued restrictions on international travel, and subdued demand from corporate travel, said another report by rating agency ICRA.

Domestic passenger traffic for November 2021 stood at 10.5 million, up 17 per cent month on month while indicative passenger traffic for December 221 suggests further improvement in traffic by 5% month-on month to 11.1 million.

However, passenger traffic is currently down by 15 per cent of pre-Covid levels while ATF prices continue to remain high and are up 50 percent on year. Airlines are likely to face a challenging time ahead if the new covid strain will result in higher cases and restrictions.

Bloomberg reported that United Airlines has canceled over 100 flights on Friday, the day before Christmas, while Delta Air Lines cut about 90 as a jump in omicron Covid-19 cases in the US is affecting availability of flight crews and ground personnel.

In an interview with CNBC-TV18, Brendan Sobie, independent analyst at Sobie Aviation, said omicron has hit passenger confidence in “travel right now because things are changing every day.” The World Health Organisation has already warned that the variant is spreading “significantly faster” than the delta strain and could change the course of the pandemic.

On November 26, the director general of civil aviation (DGCA) announced resumption of scheduled International operations from December 15 with a few restrictions. However, the regulator had to postpone it till further notice, due to the spread of the Omicron variant.

Quoting aviation research and consultancy firm CAPA India, the report from Edelweiss said that domestic passenger demand will only recover by 70 per cent in FY22 and that it would only recover to a pre-Covid level by the second half of calendar year 2022.

International travel in FY21 plunged due to the travel ban and will remain 70% lower (versus FY20) even in FY22, with likely normalcy only by FY24. The Indian airline industry is estimated to report a loss of $3.6-3.8 billion in 2021-22 (Apr-Mar), the report added.

25/12/21 Sunainaa Chadha/Times of India

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