Flight Plan

Turbulence ahead as global aviation seeks to rise from Covid crisis

Ashwini Phadnis | Updated on July 21, 2020 Published on July 21, 2020

Airlines worldwide were prepared for taxing times, but overcoming the pandemic may take longer than they bargained for

Now that countries across the globe have slowly started opening up their air spaces post pandemic, airlines have begun to calculate the losses they are staring at. The emerging picture is grimmer than what was projected earlier.

It is widely believed that the recovery of the aviation sector is at least two years away. On July 13, the International Air Transport Association (IATA) said the airlines in the Asia-Pacific will be the hardest hit by the Covid 19 crisis, with projected losses at $29 billion, or more than a third of the $84.3 billion in industry losses globally. India is part of the Asia Pacific region, and IATA’s projections are that the industry here could suffer losses of $11.6 billion in 2020.

“2020 is the worst year in aviation history and airlines are in survival mode,” said Conrad Clifford, IATA’s Regional Vice-President, Asia Pacific, adding that the $29-billion loss averages out to a loss of $30.09 per passenger. He is of the view that it will take the industry a few years to get back to the 2019 levels of activity.

Others are predicting similar figures. “It is already apparent that 2020 will see an unprecedented fall in global air traffic, but what is beginning to become clear is that 2021 will also be an extremely challenging year,” said ICF, a global services consultancy with a presence in India.

In a survey commissioned by ICF, around 70 per cent of the respondents said they expect 2021 traffic in their region to be at least 20 per cent lower than 2019 levels. The survey, conducted among flyers in late May and early June, concluded that they were pessimistic about the recovery of the sector, and a majority said they expected the recovery to take at least two years; in an earlier survey, most said they expected the recovery to take six to 12 months.

Situation back home

The same pessimism can be seen in India, too, where limited domestic operations were allowed from May-end but international commercial flights, both inbound and outbound, remain banned. According to aviation advisory CAPA, full-year domestic traffic in India is expected to be at the lower end of the 55-70 million range that it had forecast earlier.

What is making experts rework their earlier estimates for India is the fact that the limited domestic operations that have been allowed come nowhere near the pre-Covid levels — neither are they likely to do so any time soon. This could lead to a spillover of the losses to FY21.

“The outlook remains soft,” said CAPA. “Recent traffic has mostly comprised essential repositioning traffic, with passengers who were stuck in the wrong place when the lockdown was announced returning to their home base. Discretionary travel has been limited, as reflected in the fact that more than 90 per cent of the bookings have been for one-way travel, compared to 40 per cent prior to Covid.”

According to ICRA, though the restricted recommencement of domestic air traffic has begun, it will not help the industry to recover the lost ground in FY21. According to Kinjal Shah, Vice-President, ICRA, domestic airlines are operating at a lower capacity — there were 21,696 departures in June 2020, against 86,456 in June 2019, resulting in a 74.9 per cent year-on-year reduction in capacity deployment.

Directorate General of Civil Aviation (DGCA) data reveal there was an 83.5 per cent decline in the number of passengers flown this June (19.84 lakh), compared to June 2019 (1.2 crore passengers). The limited flights that have resumed are not running at full capacity, leading to further losses for the airlines.

The struggle to move on

To recoup the losses, airlines in India and abroad are going all out to woo back flyers. This begins with telling them that flying is safe, as instilling confidence in flyers has been identified as the most important measure for airlines as they struggle to move forward post Covid.

However, the attempts so far have been just a drop in the ocean and airlines may need to be extremely worried about their survival.

The latest surveys done by IATA and ICF also show that passenger confidence is slipping. The IATA survey was conducted in 11 countries including India.

“Typically, when the industry comes out of, say, a recession, it would get passengers back by offering low fares to stimulate demand,” said Brian Pearce, Chief Economist, IATA.

“Clearly, this time around, there is a real need to restore confidence. The latest survey shows that confidence is very fragile as the number of people saying that they will travel in the next few months has fallen and we certainly take a more conservative view in our expected recovery in travel.”

Alexander de Juniac, Chief Executive Officer and Director General, IATA, added that he was not really surprised by the survey’s results.

“We understand that passengers may have concerns considering the enormous amount of information that they are receiving about the pandemic. So it is not really surprising that people are worried. It is disappointing, as we have implemented a lot of protective measures and communicated a lot. Perhaps we should do more. Perhaps we should explain more. We should send more detail, we should justify what we have done and the reasons for that and confirm that the safety of our passengers is our top priority always,” he said.

However, de Juniac admitted that passenger confidence will not be rebuilt overnight. “We need to keep these messages as we move forward. With time, travellers will become more used to these measures, though we hope they (the measures) will be temporary,” he added.

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Published on July 21, 2020
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