Lockdown impact on aviation market is intense

India is the 5th largest market in terms of aircraft passengers and is now the 3rd largest- and fastest-growing - aviation market in terms of domestic tickets sold. In our country, the aviation sector contributes to $72 bn to GDP. Covid-19 has emerged as a major black swan event and has majorly impacted almost all industries but disruptions in the airline industry is so intense that it is assumed to be wider than the combined crises of 9/11 and 2008 global financial put together. The situation is deteriorating further, and few airlines have entered survival mode.

The salient points affecting the aviation industry after the pandemic include the decline in tours and travels as a huge number of international as well as domestic flights are cancelled all across the globe to restraint the transmission of the virus. The governments all across the globe are cancelling the visa of foreign people and locking down affected areas which is the major reason behind the slack in the aviation industry. The lockdown in the country and globally to contain the Covid-19 pandemic has stalled traffic on the ground as in the air and is expected to heap enormous losses. There has been an overall loss of $3.3-3.6 billion that has been incurred by the Indian aviation sector, which includes airports, airlines and ground handling agencies per quarter. Globally, the losses in passenger revenues accounted up to $113 billion due to this crisis.

With global travel restrictions, grounded fleets, benched staff, uncertainties in travel schedule, ticket liabilities, and cash burn, the survival of the aviation sector is in doubt.

Most of the airlines that came up 10-15 years ago have only seen the great times. In the aviation industry, the airlines have a boom period followed by a tough period. Once you are chasing market share at the cost of profitability, survival of airlines is tough. It is basically a very scary scenario. Rating agency ICRA in a recent note said considering the daily net loss of Rs 75-90 crore during the shutdown of operations and the expected weak demand, the Indian aviation industry will require additional funding of Rs 32,500-35,000 crore over FY 2021-22. However, there is a good chance the airline industry will come out of the pandemic in better shape for long-term success. Strong advances into the airline sector by the Tata Group could prompt mergers, and the privatisation of Air India should set it up on a better financial footing. There were already some signs that the rapid pace of growth was moderating before the pandemic struck and airlines are likely to be even more cautious, for the immediate future at least.