From the Viewsroom

Mayday, Mayday

Anand Kalyanaraman | Updated on July 30, 2020 Published on July 30, 2020

The dismal results of listed airlines point to the need for urgent help

Over the past couple of days, the country’s three listed airlines — Jet Airways, IndiGo and SpiceJet — announced their financial results. Oddly, their reporting periods were different. Jet, undergoing insolvency proceedings, declared its results for FY19 — more than a year late; SpiceJet’s results were for the March 2020 quarter — using the extended time provided by SEBI due to the Covid crisis; while IndiGo’s results were for the June 2020 quarter. So, the numbers are not comparable. But there is a common thread running through the results of the three airlines — deep distress. Jet posted a loss of ₹5,536 crore in FY19, SpiceJet’s loss in the March quarter was ₹807 crore, and IndiGo’s loss in the June quarter was ₹2,844 crore — their highest ever.

Also, the woes of the unlisted airlines in the country are no secret. The government-run Air India, reeling under debt and high losses, is struggling to find buyers; it now plans to furlough a section of its employees — some for as many as five years. Most airlines have cut employee costs. The structural problems in Indian aviation — debt-fuelled capacity expansion, intense competition leading to price wars, and high costs including fuel, taxes and airport charges — had already felled airlines such as Jet Airways. The Covid lockdowns have taken the crisis in Indian aviation to a new level, with even stronger players now fighting to survive.

The Centre has done precious little to alleviate this critical sector’s troubles. There was no meaningful fiscal relief — in terms of tax breaks or cash support — provided in the economic package. On the contrary, ATF prices have risen. Domestic flights have resumed, but airlines are operating at a fraction of capacity. It does not help that the Centre has extended fare restrictions until end-November now.

Travel demand is likely to remain subdued for some more time due to Covidconcerns. Also, business travel could see some permanent demand destruction in the new normal. Until there is a semblance of normalcy, the aviation sector needs urgent government support — fiscal and operational — to tide over the storm. The sector is a critical cog in the country’s economic wheel; it is imperative that it survives and thrives with adequate competition in the consumer’s interest too.

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Published on July 30, 2020
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