Six months after Covid-19 lockdown: Airlines, hotels try to journey back

Airlines and travel firms are slowly trying to limp back to life, without any clear map given these unprecedented times
In March, as the number of coronavirus cases across the world rose, forcing Air India to evacuate Indians from China and Italy, civil aviation ministry mandarins were meeting in Hyderabad for the biennial Wings India event. “There is no need for the aviation sector to worry about coronavirus. It’s a temporary phase,” Civil Aviation Minister Hardeep Singh Puri told the gathering.

 

Seven days later, India went into lockdown. Air transport was grounded for two months, the longest ever in the history of civil aviation.

 

Six months later, faced with their worst crisis and without any financial assistance from the government, the viability of the Indian aviation and tourism industry is in peril, with companies struggling to stay alive and save over 18,000 jobs.

 

According to consulting firm HVS Anarock, a near complete shutdown of hotels for well over three months pulled down average occupancy across the sector by more than a third. Revenue per average room (RevPAR) plummeted by 58 per cent in the first half of the year.

 

Airlines and travel firms are slowly trying to limp back to life, without any clear map given these unprecedented times. “We are clearly in uncharted territory. However, we also recognize that the industry is going through a very disruptive phase, which presents us with a unique opportunity to strengthen our airline,” said IndiGo CEO Ronojoy Dutta.

 

IndiGo, the largest airline by market share, intended to deploy 60 per cent of its pre-Covid capacity. It has failed. The main reason why IndiGo and other airlines are struggling to expand is quarantine. “The biggest hurdle to expand is that quarantine measures across many states are deterring people’s plan to travel,” said a SpiceJet executive.

 

IndiGo at least is cushioned with Rs 18,449.80 crore. Others such as SpiceJet and GoAir whose balance sheets were already under stress are fighting an existential battle.

 

Aviation consultancy firm CAPA’s estimate is that these airlines will have to shrink operations and fleet size by around half, return planes, and defer accepting deliveries of new aircraft.

 

The airlines have asked the government to set up an interest-free line of credit of at least $1.5 bill­ion, besides facilitating additional unsecured credit for 60 days on jet fuel purchases from oil marketing companies and deferment of tax. But an already cash-strapped government hasn’t been able to offer anything.

Experts said that it will be difficult for airlines to get any restructuring of existing loan facilities or fresh loans unless promoters infuse cash. “The promoter has to show intent and infuse cash in order to increase the confidence of lenders,” said Kapil Kaul, CEO, South Asia, CAPA.

 

Hotel operators and asset owners believe things have started improving month-on-month and that the worst is behind them. “We have seen some encouraging signs in the last two months. The booking pace is picking up. Part of it has to do with the easing of travel restrictions and people coming to grips with the situation,” said Neeraj Govil, senior vice president, South Asia, Marriott International, in a recent interview to Business Standard.

 

Some analysts believe that, with the recovery having kicked in, upscale resorts in leisure destinations are likely to benefit first.

 

“Perhaps the biggest challenge is likely to be faced by big-box city hotels that were traditionally dependent on three major segments - inbound business travel, corporate MICE, and domestic transient corporate,” said  Achin Khanna, managing partner, Hotelivate.

 

Room night demand emanating from all of these segments will take longer to revive. Khanna said that it would be a good idea for these hotels to shift gears and focus on social, domestic leisure, and MICE.



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