How Covid-19 Pandemic Cripples the Indian Aviation Industry?

The aviation industry in India is one of the leading contributors to the country’s economic growth, currently contributing US$72 billion to national GDP. However, the outbreak of Covid-19 has hit hard the 3rd largest and fastest-growing aviation market in terms of domestic tickets sold. According to the advisory firm CAPA India, the Indian aviation sector is likely to contract significantly, with the first quarter expected to be a virtual washout, and with 250 of the total 650 aircraft becoming surplus in the next 12 months. The decline in the sector is largely occurring due to the limitations of international and domestic flights travel.

According to industry reports, the current financial year started with the closure of Jet Airways, the country’s largest international and second-largest domestic carrier. Combined with the subdued demand due to the slowdown in the Indian economy, there has been virtually no growth in traffic over the last 1 year.

The Indian aviation sector, with predicting a 25 percent decline in industry revenues, may be staring at around US$1.5 billion-US$2 billion of losses due to the current lockdown parameters. Initially, the coronavirus Covid-19 pandemic resulted in a steep decrease in oil prices which expedited the growth of the aviation industry. But it then declines, especially because of a deficiency in demand across the globe.

Many airlines worldwide have cut down their routes by 30-35 percent, and also have started issuing pay cuts or unpaid leave to their cabin crews, pilots and other staff members.

Furthermore, the Indian aviation sector has experienced several operational challenges during the year, such as the temporary closure of Pakistani airspace that affected westbound international operations; the grounding and suspension of deliveries of MAX aircraft; and continuing issues with Pratt & Whitney engines on NEO aircraft.

The CAPA India outlines the preliminary estimates for the near-term impact on the Indian industry, including initial weakness in the domestic market emerged in February, with some carriers experiencing a 5-10 percent year-on-year decline in yields, although others were able to maintain similar levels to last year. But during 1-15 March the yield decline has accelerated across the board to around 12-15 percent. The estimates also noted that forward bookings are down more than 30 percent compared to the last year.

According to the CAPA, as new advisories and restrictions being announced every day and the Indian government urging people to avoid all non-essential travel, demand is expected to decrease substantially, with a drop of 40-50 percent or even higher.

Based on the latest cancellations, the CAPA also estimates that international capacity is currently estimated to be down by 60-70 percent year-on-year, although the situation is evolving daily. Currently, India has banned the entry of all foreign nationals until at least April 15. As per CAPA, foreigners account for around 25 percent of international air travelers to and from India.