Takeoff Uncertain

Most countries, including India, had grounded flights in a bid to contain spread of Coronavirus as passengers travelling from infected areas were seen infecting others in hitherto unaffected areas.

Grounding of flights adversely hurt the economics of airlines world over. While nine airlines globally have already collapsed, most others, including those considered invincible thus far - like Singapore Airlines, British Airways, Lufthansa, Emirates, etc have either laid off staff, resorted to pay cuts even while significantly downsizing the fleet by prematurely retiring older aircraft.

The challenge before the aviation industry is humongous because of huge demand destruction that’s being witnessed in countries where airlines have continued to operate flights albeit with shrunk networks with reduced frequencies. In USA, even though more than half of 6,125 aircraft have been parked either at major airports or airstrips in desert areas, flights are averaging no more than 20 passengers per flight. Left to themselves, the airlines would have perhaps ceased operations but are compelled to operate flights because they have availed govt financial support, which has come with riders attached – airlines will continue to operate flights and not lay off staff. At Heathrow, fall in demand is around 97%. Singapore Airlines has grounded 96% of its fleet.

IATA, the representative body of airlines, has forecast a revenue loss of over $350 billion in 2020 as compared to 2019 with 25 million job losses. Revenue loss figures are all set to be revised upwards as pandemic is showing no signs of abating in several countries and uncertainly regarding resumption of flights persists. As per Centre for Asia Pacific Aviation, 250 of the 650 aircraft with Indian carriers will be rendered surplus, thus visualising a 40% drop in air traffic.

How long will the misery of airlines last? Estimates vary from a year to two to even three. Air Canada has said the market is unlikely to attain pre-Covid-19 level of traffic before three years and has accordingly trimmed staff, reduced fleet.

Is the fear of airlines genuine? Yes, because the demand destruction is genuine. To establish the extent of demand destruction, let us look at who all typically constitute as passengers on a flight? Business travellers, leisure travellers, people attending conferences and seminars, those going for medical surgeries to hospitals in major cities, students for education and, of course, those who travel to visit friends and relatives for social engagements.

All of them will either stay away from travelling due economic reasons - as economy takes time to get on track or due to the sheer fear of getting infected while travelling. Why take a chance of getting infected is the common refrain of passengers who otherwise take a flight at the first given opportunity? Compounding the fear element is the ‘play safe’ attitude of States and countries which have managed to contain the pandemic. They don’t want outsiders to come and infect their people. Australia is one country which has already made known its intention: no arrival of tourists till October, except from New Zealand, which is another country to have effectively controlled spread of Coronavirus.

In India, airlines are itching to get back in the air. They have prematurely announced resumption of flights twice by initiating flight bookings only to be snubbed by the government. Even as various other sectors of economy are permitted to resume manufacturing or services, all means of transportations have remained in the list of prohibited activities, even in Lockdown 4.0, the misery of several stranded passengers due sudden imposition of ban on flights in the wake of lockdown, notwithstanding.

Even when flights do get eventually resumed after introducing necessary safeguards like passengers having to mandatorily wear masks, possibly gloves too, airlines will face the daunting prospect of flying with hugely reduced loads on already shrunk networks and reduced frequencies. The agony of airlines is thus unlikely to end anytime soon till the Coronavirus is either eliminated or a vaccine is produced because flying is rightly perceived as one which helps spread the infection, like it did in January when foreign-residing Chinese nationals flew virtually to all parts of the world from China after celebrating the Chinese New Year. (The Author is ex-ED of Air India)

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