Aviation industry set to crash as India gounds domestic flight services

NEW DELHI: COVID-19-hit aviation sector of India is bracing for a huge impact as Ministry of Civil Aviation has ordered suspension of all domestic flight services, except solely cargo-carrying flights beginning Tuesday midnight for an “undefinite period”  to contain spread of the pandemic.

Kinjal Shah, Vice President at the Investment Information and Credit Rating Agency (ICRA) said that even though industry load factor has been very low in the last few days, a complete shutdown will have a huge finance impact.

“Not every airline has a healthy cash flow. Meeting fixed expenses will be a challenging task. A lot is dependant on the government’s stimulus package as going ahead recovery will be very slow, especially for the international sector. There is also a possible scenario of a few airlines meeting the fate of Jet Airways and Kingfisher Airlines,” Shah told this publication.

Airlines are likely to waive off flight rescheduling and cancellation fees, which would put more pressure on their balance sheet. To note, sector is already reeling under huge debts and has been hit because of overall economic slowdown.

Another aviation expert on the condition of anonymity said that survival of Wadia-family backed GoAir and Ajay Singh promoted SpiceJet can turn critical without an external support. “These two airlines, unlike others, does not have huge cash reserve or backed by large Groups,” the expert said.

The latest effort to lock down movement within the country comes days after India suspended all international flights from landing in India, a measure which forced many airlines to cancel hundreds of flights, ground dozen of flights and even cut pay slips of senior employees.

Some experts also believe that the ongoing January-March period may turn out be the worst ever quarter for the aviation sector. The Corrective Action Preventive Action (CAPA) on March 18 had estimated that consolidated losses for all airlines in India, except Air India, in Q1 are expected at $500-600 million but “this is bound to be revised downwards later”.

COVID-19 has already hit operations at the world’s biggest airlines. Singapore Airlines, which termed the outbreak as “the greatest challenge” it had ever faced, is cutting down capacity by 96 per cent and grounding almost all of its fleet.

 

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