Coronavirus: Aviation sector stares at $3.6 bn loss in Q1 on lockdown

Aviation consultancy CAPA on Wednesday projected initial losses of USD 3.3-3.6 billion for the Indian aviation industry in the first quarter of FY2021 in the eventuality of all air services including domestic remain shut by June due to the coronavirus pandemic.

The pandemic has had a significant impact on the aviation industry due to the stringent border controls by a host of countries and imposition of the travel ban on the people of other nationalities to contain the virus infection.

The Indian government has also suspended all air services among the several measures to prevent if from getting a large part of the population infected.

" India's aviation sector could incur losses of USD 3.3-3.6 billion in 1QFY2021. Assuming that all domestic and international operations remain grounded until Jun 30," the Centre for Asia Pacific Aviation (CAPA) India said in its preliminary report.

Prime Minister Narendra Modi on Tuesday announced a 21-day complete lockdown from Wednesday, stating that it was the only way of breaking COVID-19 infection cycle.

"Even with some partial resumption of services in May and June, the financial outcomes may not change significantly," Modi saidin his televised address to the nation Monday evening.

The CAPA has also sought "urgent" government intervention and coordinated industry response to address all the requirement of the aviation industry.

According to the CAPA, the airline sector losses are expected to be around USD 1.75 billion while that of the airports and concessionaires at around USD 1.50-1.75 billion and another USD 80-90 million losses of the ground handling companies.

Noting that the domestic airline sector was already vulnerable even prior to the advent of COVID-19, the CAPA said most Indian airlines have not structured their business models to be able to withstand even regular shocks, such as elevated fuel prices or economic downturns, let alone once-in-a-century events.

With few exceptions, Indian carriers have weak balance sheets and precarious levels of liquidity, the CAPA said in the report, adding airlines have generated cash to stay afloat through advance sales or sale-and-lease back margins (and government infusion in the case of Air India), but with no cushion to be able to withstand downward cycles.

Stating that with global aviation almost grinding to a halt - and for what could be an extended period this is a state of affairs that will heighten risks for even the strongest carriers in the world, CAPA apprehended several weaker airlines might go belly-up.

According to the CAPA, India's airline system is certainly "not prepared" for such a severe systemic shock, and this will have an impact on the entire aviation value chain, including the airport operators; duty free, retail, F&B, MRO,among others.

"The entire sector is now in a state of crisis which will certainly impact FY2021 and quite possibly well beyond," it said.



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel