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Airlines struggle to fill seats as flyers shelter from Covid-19

Ashwini Phadnis | Updated on August 07, 2020 Published on August 07, 2020

Worry in the air: The few who are flying today are doing so with trepidation and abundant caution, as the Covid-19 transmission curve is far from flattening   -  SOMASHEKAR GRN

Hopes soared along with the domestic flights that took off on May 25 after being grounded by the Covid-19 pandemic for two months. Many felt normalcy was around the corner, and even international travel appeared within reach. A month later, however, many of these expectations have crash-landed, and no one’s cheering — not the flyers, not the airports and certainly not the airlines

* Travellers complain about the lack of social distancing at airports and on planes, cancellations and diversions of flights, the requirement to check in even earlier than before

* IATA projects that airline revenues in India will fall by $11.6 billion in 2020 as compared to a year ago.

* On July 29, IndiGo reported a net loss of ₹2,844.3 crore for the April to June period.

* Vistara confirmed it is trying to delay the delivery of some aircraft orders.

* There is no uniformity or clarity on the number of quarantine days for flyers in different states.

Today, you can check in online from the comfort of home, and print your baggage tags and boarding passes before arriving at the airport. Long queues are a thing of the past, as is frisking at security checkpoints (unless one triggers a security alarm), or stamping of boarding passes. You can carry 20 kg of free check-in baggage compared to 15 kg or less earlier.

When domestic flights resumed in limited numbers on May 25, after two months of zero commercial operations, it was supposed to signal the beginning of India’s fightback against the Covid-19 pandemic. Nothing could convey a return to normalcy than the roar of planes overhead, many felt, and it was just a matter of time before international travel could resume too. But over two months later, no one’s cheering — not the flyers, nor the airports and airlines.

So, just who is ready to fly right now? Mainly those who are stranded and desperate to get back home, or have other compelling reasons such as a death in the family, or a health emergency. And that too with trepidation, what with travellers complaining about the lack of social distancing at airports and on planes, cancellations and diversions of flights, the requirement to check in even earlier than before — that is, four hours ahead of departure.

The government on May 25 allowed airlines to resume domestic commercial operations with 33 per cent of the flights they were operating before the pandemic struck (a year ago, the average daily departures in June numbered around 2,800). This was soon increased to 45 per cent, but airlines are struggling to operate even 25 per cent of the 33 per cent capacity they were initially allowed.

Naturally, airports remain deserted too.

Airports, on their part, are doing the best they can to instil confidence among flyers, including circulating fresh air in the building, converting all check-in formalities into touch-free processes, and even opening up their retail outlets.

Meanwhile, the losses are mounting.

The International Air Transport Association (IATA), representing over 250 airlines or 82 per cent of total air traffic globally, projects that airline revenues in India will fall by $11.6 billion in 2020 as compared to a year ago. IATA’s country director (India) Amitabh Khosla warns that with a 49 per cent (over 93 million) fall in the number of passengers, the Indian aviation sector “will be decimated to half its 2019 size”.

The effects are already showing. On July 29, IndiGo reported a net loss of ₹2,844.3 crore for the April to June period. To compare, it had reported a net profit of ₹1,203.1 crore during the same period last year. Kapil Kaul, chief executive officer of aviation advisory CAPA, said the losses reported by the low-cost carrier were its highest ever.

IndiGo blamed it on the closure of operations till May 24 and the lower capacity deployment thereafter.

On the same day, SpiceJet — another low-cost carrier — also reported a net loss of ₹807.1 crore during January to March, as against a profit of ₹56.3 crore during the same period last year. The reasons were no different either.

The limbo in the country’s travel and tourism sector has left an estimated 3 million of its workers staring at the prospect of job losses, says Khosla.

IndiGo, with a reported market share of nearly 50 per cent, has sacked 10 per cent of its staff (it had 23,531 employees as of March 2019); even the national carrier, Air India, has offered employees leave without pay from six months to two years (extendible to five years) to tide over the crisis. Almost all airlines’ staff have taken pay cuts, even as their employers work with vendors to delay the delivery of aircraft they had booked earlier. Vinod Kannan, chief commercial officer of Vistara, confirmed that the airline is trying to delay the delivery of some aircraft orders.

Airlines face a double whammy. On one hand, they are unable to get enough people to fly despite providing face shields and sanitisers to every flyer, personal protection equipment for the occupants of middle seats, and boarding and deboarding in batches to avoid crowding. On the other hand, despite a two-month ban on domestic flying, the airlines continued to spend on aircraft leases (they pay the leasing company a fixed sum every month to operate the aircraft) and maintenance to keep the fleet flight-worthy.

Pass up: Airlines are unable to get enough people to fly despite providing face shields and sanitisers to every flyer, and boarding and deboarding in batches to avoid crowding, among other measures   -  T NARAYAN/ BLOOMBERG

 

 

 

In January this year, before the lockdowns kicked in, domestic airlines flew 1.28 crore passengers (1.25 crore in January 2019). SpiceJet took the number one spot, reporting a passenger load factor (PLF) of 91.5 per cent, followed by GoAir (88.7 per cent) and IndiGo (87.8 per cent). PLF is an indicator of the number of seats that get filled in an aircraft.

Just how long will it be before Indians take to the skies again with the old enthusiasm? Not for another “six to eight quarters”, or around two years, according to Jagannarayan Padmanabhan, practice leader and director (transport and logistics), of CRISIL Infrastructure Advisory, a subsidiary of American company S&P Global that provides rating, research, and risk and policy advisory services.

The projections are as bleak for the rest of the world. On July 28, IATA said global passenger traffic will not return to what it was in 2019 until about 2024 — a year later than what it had predicted earlier.

The resumption of limited domestic services in India is not enough to help the industry recover lost ground in fiscal 2021, says Kinjal Shah, vice-president of credit rating firm ICRA Ltd.

Anticipating some recovery in the second half of fiscal 2021, she however expects to see 41-46 per cent de-growth in domestic passenger traffic, below fiscal 2016 levels.

These bleak projections are spurred by a range of ground realities. Foremost is the varying spread of the virus in different states. State governments have imposed their own set of quarantine rules, leading to confusion among the flying public. West Bengal, for instance, has banned flying to Kolkata from six high-prevalence cities — Delhi, Mumbai, Pune, Chennai, Ahmedabad and Nagpur — till August 15. There is no uniformity or clarity on the number of quarantine days for flyers in different states, and whether it is institutional or home quarantine. While it is clear that having the government-promoted Arogya Setu mobile app helps, as it can trace any contact with a Covid-19 positive person, the other documentation required for flying from state A to state B is not as clear.

Disinfected departures: Airports are attempting to instil confidence in the flying public with a slew of sanitisation and social distancing measures   -  RANJEET KUMAR

 

The Directorate General of Civil Aviation, too, stated that the passenger load factor (PLF) in June had sharply declined “due to limited air operations because of the Covid-19 outbreak”.

IndiGo officials said the lockdown and airport restrictions have made it impossible to achieve even 25 per cent capacity.

“We are keen to operate more flights. Currently our daily departures are around 400 but this is a fluctuating number depending on what kind of lockdown or restrictions are being imposed at airports,” Wolfgang Prock-Schauer, president and chief operating officer of IndiGo, told BusinessLine on July 16.

For instance, Mumbai allows passengers to fly into the city as long as they can prove that they will go back within seven days. On the other hand, Andhra Pradesh insists on 14 days of home quarantine and Delhi insists on seven days of home quarantine.

Prock-Schauer called for ending certain restrictions in Mumbai, Chennai and Kolkata airports that were preventing airlines from reaching 45 per cent capacity. To illustrate, as a result of the lockdown, Mumbai first declined to accept any flights. Then it agreed to have 25 landings and 25 takeoffs a day, before increasing this number to 50.

Normally, airlines fly into Mumbai and then onwards to various cities around the country. Similarly, Kolkata, which acts as a gateway to eastern India, is not accepting any flights on some days in August, thereby affecting the operations of airlines.

Then there is the cap on airfares, initially in force till August 24 but currently extended till November 24.

The fare cap stipulates the upper and lower levels for a one-way flight ticket. Additionally, the government has stipulated that at least 40 per cent of the seats should be sold at the mid-way point; this is about ₹6,700 or below for a one-way Delhi-Mumbai ticket.

Ronojoy Dutta, whole-time director and president of IndiGo, wants an end to the fare caps as early as possible. “Markets are very dynamic, directional and seasonal. It is impossible for anyone to predict and decide what the right level of fares should be... We can do a better job in managing the revenues without the fare cap. It will also work to the advantage of the customer,” he says.

IATA agrees. “Capping prices or putting floors on prices is very much a last resort. All the experience of recent decades has shown that the market is a much better way of assessing what consumers are willing to pay. The trouble with a price cap and a limit on flying is that India is going to lose the wider benefits of air travel — the connections between cities that allow not just travellers who spend monies in the cities but also the trade which is carried out by those aircraft. There are wider economic consequences that will delay the recovery,” Brian Pearce, chief economist IATA, told BL.

Does India now run the risk of some towns and cities falling off the air map?

Shah points out that airlines choose routes based on factors such as expected passenger demand and associated costs. “It has been observed that several routes to smaller towns and cities have been profitable owing to the high passenger traffic, while some routes have been loss-making,” she says.

With subdued traffic post Covid-19, the airlines will rationalise routes even as they adhere to the Route Dispersal Guidelines (which stipulate that domestic carriers operate a set percentage of flights in the non-lucrative markets), she adds.

CRISIL’s Padmanabhan thinks air traffic will inch back in a calibrated manner. “At least till the end of the calendar year, only essential travel will happen, and this will be more accentuated for Tier 2 locations,” he says.

On a global conference call on July 28, when asked if the reluctance to fly is driven more by economics, by fear or by quarantine issues, Alexandre de Juniac, IATA’s director general and chief executive officer said, “I am not sure we know that.” It’s all up in the air, truly.

Have a safe ‘air bubble’

Alex McEwan, country manager India, Virgin Atlantic

 

  • How Virgin Atlantic is cautiously optimistic of a September restart
  • Conceding that load factors for the rest of the year will be lower than what Virgin Atlantic was used to in the past, Alex McEwan, country manager India, maintains that sanitisation and other safety measures will help reassure passengers. Edited excerpts from an interview with BLink.
  • Virgin has announced bookings from September. What happens if the Indian government does not open up international travel by then?
  • The environment is really fluid at the moment, so we want to make sure we give as much flexibility as possible to our customers. If we have to make changes to the flights and they need to be moved because of quarantine conditions or government regulations, then we will encourage customers to reach out to us. Give us their details and we can rebook them on another alternative date free of charge... all the way up to September 30, 2022.
  • We realise that they might not be sure about when they will travel in the future. This policy protects the customers, as the date change fee is waived in such cases.
  • You might waive the date change fee, but if a passenger has booked at a low fare will you retain the lower fare at a later date?
  • If the rebooked travel date occurs before November 30 this year, we’ll also waive any potential fare difference. If the rebooked travel is between December 1 [2020] and September 30, 2022, we’ll waive the date change fees, however the fare difference will apply.
  • India is talking about opening up air corridors with various countries including the UK. Would Virgin be interested in this?
  • It is a promising start. It demonstrates a step away from where we have been and a step towards more normal return of services. We are definitely looking at that... We will be closely monitoring the progress of the talks between the respective governments.
  • Can you expand on what an air corridor will look like?
  • We hear the terms ‘air corridor’ and ‘air bubble’ mentioned a lot. It can often have different definitions depending on the country. It could mean quarantine-free travel; it could mean a reduced quarantine period, say seven days rather than 14 days; it could mean seven days institutional quarantine and seven days home quarantine, as we are seeing in travel into Delhi. We would need to see the specific details of what an air corridor looks like between the UK and India, because it may look different from what it looks like between the UK and somewhere like South Africa. So I do not think there is a globally recognised standard for what an air corridor is. It is very much a bilateral agreement between two respective governments.
  • Survey after survey shows that passenger demand is not growing at all. What steps is Virgin taking to convince the public it is safe to fly?
  • We have to accept that passengers will be cautious to fly in the beginning. We are doing everything we can to instil confidence in our customers. We have measures covering every part of the customer’s journey so we are not solely focused on-board; we have also worked very hard in the last four months on what we have to do on the ground in the airport. We do fogging after every flight, we also have masks.
  • Our executive vice-president (customer) flew on the first flight Virgin operated on July 20 between Heathrow and Hong Kong because he wanted to see what it was actually like first-hand.
  • India suspended flying on March 25. Obviously passengers would have booked their tickets on Virgin Atlantic and other airlines. How will Virgin Atlantic accommodate or refund passengers who booked before the lockdown started?
  • We had a massive number of requests, as you would expect, for refunds and requests to change dates. Over the last few weeks we have increased the resources dedicated to this activity.
  • We have people usually dedicated to sales or account management activity moved to the task of processing refunds. We give them the training they need to help out the rest of the team.

Ashwini Phadnis

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Published on August 07, 2020
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