A slew of measures at the innovators and operators’ levels is ensuring safe air travel
Last year, as the pandemic hit, several countries including India took to temporarily halting international and domestic flights. The reason for this was simple—airports are ports of entry, just as road and rail crossings are on the land border. Even though highly inconvenient for the travellers and airline operators, putting a temporary ban on air travel meant safeguarding the local population of each country by not importing potential Covid-19 cases from abroad.
As the cases stabilised and airlines were allowed take off again, a slew of safety measures came to be introduced. The state of aviation sector, however, is yet to see the earlier demand in most countries. This has led to severe distress in air and travel industry. In any case, the industry in general is sensitive to slightest changes in national policies and global situation, in addition to the volatility of fuel prices, high competition and perceived unstable sectors.
In India, as the second wave of the Covid-19 pandemic began wreaking havoc, domestic flights continued to function. However, the fear and apprehension regarding the virus kept people away from travel. Most airlines then ran at less than half their capacity. With tourism on halt, aviation sector just like other sectors bore the brunt of functioning but not attracting enough business.
In case of the airlines, the sustenance gets even more difficult because of the sky-high prices that the airlines operators are required to pay. No wonder, they often complain of the government’s lack of support in such times when the sector sees no business. This lack of support shows itself in several ways. The aviation turbine fuel (ATF), for instance.
The cost of ATF, which in amongst the highest in India, is one of the reasons why Indian airlines struggle to remain afloat. The ATF accounts for 35-50 per cent of the cost of running an airline in the country. Indian airline operators end up paying at least 40-50 per cent more on ATF, as compared to their counterparts abroad. The increase in fuel prices, leads to an overall increase in operational costs. Rising prices coupled with an uncertain demand forces airlines to limit operations only to specific routes, and ignore the ones that see lesser demand.
An instance that happened recently says volumes about the loss that the airlines are having to incur. The CEO of a Dubai-based company Stargems Group, Bhavesh Javeri, was the lone passenger on a 360-seater Boeing 777 Emirates aircraft from Mumbai to Dubai. Travelling economy, he had paid only his Rs 18,000 economy for the passage. The few other passengers on the flight had either cancelled or postponed their trips due to Covid-19.
While this may have been an odd case, ultimately, it is the flyer who has to pay for the high cost of operations. The ATF prices in February 2021 rose by the 3.6 per cent, compared to the previous fortnight. The increase in ATF prices is generally linked to a surge in international crude oil prices. This is in addition to the heavy taxes that are levied by the state and central governments.
In March, the civil aviation ministry had announced that it was working on the airline industry’s demand to bring ATF under the ambit of GST and had taken up the matter with the finance ministry. However, this is yet to see the light of day. With low passenger demand, some airlines either resorted to adding more freighters or converted passenger planes into cargo planes.
In April 2021, the International Air Transport Association (IATA) released data for global air cargo markets showing that air cargo demand continued to outperform pre-Covid levels (April 2019) with demand up 12 per cent. As per IATA’s regional performance data, ‘Asia-Pacific airlines saw demand for international air cargo increase 9.2 per cent in April 2021 compared to the same month in 2019. This was a significant improvement in performance compared to the previous month. International capacity remained constrained in the region, down 18.7 per cent versus April 2019. As was also the case in March, the region’s airlines reported the highest international load factor at 77.5 per cent.”
In May this year, with an already low income, the government cut down capacity for airlines to operate from 80 per cent to 50 per cent. This was done in order to ‘safeguard viability of airlines with weak finances. Simultaneously, it has increased the upper cap of airfare to go up by around 14 per cent due to the rise in fuel prices.’
According to a Business Standard report published in May, ‘The directive comes at a time when airlines suo moto have reduced capacity with some even flying less than 50 per cent capacity. Industry sources said that government’s direct intervention on fare and capacity have severely divided the airlines with SpiceJet, Go Air supporting the move whilst market leader Indigo and Tata Sons-owned Vistara opposing it. Airlines like SpiceJet and Go Air’s finances are at a precarious stage with both airlines on thin cash balance. Wadia group’s Go Air is planning to raise around Rs 3,600 crore to pay off debts and vendors. Aircraft lessors have sent notices to both Go Air and Spicejet for defaulting on lease payments. Sources said that in a meeting between secretary Pradeep Singh Kharola and airline executives, Spicejet and Go Air said that with flights being empty and fuel costs increasing it has become unviable to keep operations sustainable and the government should cut capacity.”
It is important for the government to assist the aviation industry lower its burden, as India holds a large section of aspiring Indian middle class and first-time flyers. This sector can help Indian economy immensely.
The IATA Data
The IATA released its April travel demand data, which it called a ‘tale of two markets—domestic recovery and international stagnation’. The press statement said, ‘…(IATA) announced that domestic travel demand improved in April 2021 compared to the prior month, although it remained well below pre-pandemic levels, while recovery in international passenger travel continued to be stalled in the face of government-imposed travel restrictions.’
IATA announced that domestic travel demand improved in April 2021 compared to the previous month, although it remained well below pre-pandemic levels, while recovery in international passenger travel continued to be stalled in the face of government-imposed travel restrictions.
Total demand for air travel in April 2021 was down 65.4 per cent compared to April 2019. That was an improvement over the 66.9 per cent decline recorded in March 2021 versus March 2019. The better performance was driven by gains in most domestic markets. International passenger demand in April was 87.3 per cent below April 2019, little changed from the 87.8 per cent decline recorded in March 2021 versus two years ago. Total domestic demand was down 25.7 per cent versus pre-crisis levels (April 2019), much improved over March 2021, when domestic traffic was down 31.6 per cent versus the 2019 period. As with March, all markets except Brazil and India showed improvement compared to March 2021, with both China and Russia reporting traffic growth compared to pre-COVID-19 levels.
Asia-Pacific airlines’ April international traffic was down 94.4 per cent compared to April 2019, incrementally improved compared to the 94.9 percent decline registered in March 2021 versus March 2019. The region experienced the steepest traffic decline for a ninth consecutive month. Capacity was down 86.3 per cent and the load factor sank 47.7 percentage points to 33.5 per cent, the lowest among regions.
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