Monday, September 27, 2021

INDIAN AVIATION NEEDS FISCAL CLIMB POWER

by Bikram Vohra

Ever since that fateful day of March 24, 2020 when Indian aviation was asked to stand down, the industry has been gasping for climb power to rise above the Covid cloud cover, a dark and malevolent cloud. Even as the second wave subsides in India, the fear of a third and multi-variant attack is not off the table.

The casualties are not just the carriers but also the airports and support systems. Into this cruel mix, we have over 40,000 job losses and counting. Vacillating between 50% and 80% maximum load factors the domestic route is also severely bruised. Unfortunately, courage and fortitude to hang in there is not enough and of the 14 carriers in operation on domestic routes, the total fiscal loss is huge. According to a Centre for Asia-Pacific Aviation (CAPA) assessment airports are expected to witness a decline in operating income by 6.1% to INR 8,400 crore, while reporting an operating loss of nearly INR 1,700 crore and a net loss of INR 5,400 crore (64%) in FY 2021. “The overall cash loss for the sector is estimated at around INR 3,500 crore in FY2021, impacted by a 66% year-on-year slip in passenger traffic amid Covid-induced travel restrictions.”


CAPA adds another dollop to the bleakness;

“Indian aviation industry too has not been spared its devastating impact. Indian airlines alone will incur a loss of around $4.1 billion loss in the current fiscal (2021-22), with another $3.9 billion losses reported in the last fiscal, according to a June 3, 2021 calculation.”
How long can these entities stay in the air in what is an open-ended crisis without even the hint of a closing date?

Of the 710 aircraft that make up the combined fleet, many have been grounded and we are nowhere near the 7000 odd takes offs and landings in a 24-hour cycle. To make the mothballed planes airworthy once more is a huge expense in the offing. For the MRO sector, it can come as a major boost, what with the government unsnarling some of the red tape that has kept this vital dimension to aviation in knots and never given it a chance to mature as a competitive entity. Equally scary is the shrinking of the domestic network as the smaller airports lose out across the board. Of the 486 total airports, airstrips, flying schools and military bases available in the country 123 airports enjoy scheduled commercial flights including some with dual civilian and restricted military deployment. There are now 34 international airports.

This is not a small network and while one lauds the efforts of carriers like Indigo, Vistara and Spicejet to keep slogging away, the fiscal bleeding is tangible. It has not been easy. According to the International Air Transport Association (IATA) India’s year-on-year domestic air passenger growth rate plunged by 37.6 per cent in January 2021. In addition, there is no concrete evidence that even pay-rolled airlines like Air India and Indian Airlines will fly into the black anytime soon.

The pressure then is on the government and there has to be a specific two-point strategy put into place. The first is the human factor. Both carriers and airport authorities have to generate a picture of confidence in a nervous flying public that was seeing a 5.5% annual growth and creating waves in the global market. Have they with the help of the Centre and the states been able to do enough to dispel half-truths and fear mongering off social network sites and give Indian fliers the conviction that flying is safe? One thinks there is more to be done. Despite the sporadic efforts in sending out the message, the residual uncertainty still manifests itself. Between the different lockdown protocols in various states, the inability of these governments to get onto the same page and the often-contradictory rules of conduct make a flight a tedious and confusing exercise. While politics adds to this mess, the carriers continue to suffer. Think of it, there are now a minimum of 36 different rules of conduct from entry to an airport through the boarding and inflight process followed by disembarkation and exit. These range from Covid protection, paperwork, PCR tests, facing lockdown measures, refusal to board, luggage restrictions, all of which make taking a flight a daunting business.

For their own sakes, the need of the hour by the decision makers in the aviation sector is to collectively create a surge of concrete confidence. Newly installed Aviation Minister Jyotiraditya Scindia’s decision to form three high-powered panels to address the three most important aspects of Indian civil aviation is a good move because it signifies intent. These committees represent “airlines, airport operators, cargo carriers, ground handling companies, flying training organisations and maintenance, repair and overhaul companies to advise him on critical issues of the sector.”

According to the ministry, the airline group has among its members three promoters — IndiGo’s Rahul Bhatia, SpiceJet’s Ajay Singh and GoAir’s Ness Wadia; CEO/CMDs — AirAsia India’s Sunil Bhaskaran, Vistara’s Bhaskar Bhat, Air India’s Rajiv Bansal and Alliance Air CEO. At present this is the most important group and these ‘fine gentlemen’ need to light the spark. Scindia’s father once held the same post and I was privileged to work with him on a couple of issues as an aviation writer. One can truly hope that this same sagacity has percolated to his son who has inherited the world’s largest aviation crisis. Too many advisors can be a nuisance in itself because too much time is spent in getting ducks in a row. While these meetings might serve as an ego sop and provide Scindia with a decent amount of insight, in the end he will have to walk the tightrope alone and implement, implement, implement. The aim should be singular; to save the industry from a not so controlled flight into terrain.

The one problem with these committees is too much talk. These heads of carriers must speedily get onto a massive public relations exercise to restore faith and make the experience less arduous. While the glamour of flying is, a dim memory air rage has been inflated by air fears and air exasperation. These need to be addressed. In addition, suggestions need to leap from paper and files to immediate action. For a brief, shining moment, all the carriers need to put on hold their competitiveness and bail water together. Use the Net effectively, start talking directly and forcefully to potential passengers and get up close and personal. We the people, all 14.4 crores who travelled by air in 2019 and the open-ended potential flier are looking for that hand holding empathy…and they will respond.

On that canvas, therefore a financial bailout has to gain precedence over everything else. The industry cannot be allowed to collapse. While the Indian government did cough up $22 billion in the early days of the pandemic to the industrial belt, the aviation sector was left out in the cold. Now, it has ice on its wings and, despite the mixed metaphor, is breathing on fumes. An initial pie of around $3 billion is needed just to keep going. Inflated ticket pricing to fill the coffers is a gouge and will only deter reluctant people from getting on a plane.

It is a global issue this back to the wall situation and while government bankrolling of private airlines is seen as unfair practice in some quarters this is so unusual a situation that it is sink or swim together time.

Even a winner like Indigo is feeling the pinch; all except Air India were grounded for an extended period last year. The Maharaja was doing yeoman service with mercy missions designed to bring stranded Indians home and good for bit. That said, no one has pulled in the slack because the fear, like a malevolent fog, is still there.

Ironically, the work from home ‘zoom it’ option and the fragile corporate bottom lines forcing a slowdown on corporate travel have also had, and are having, an adverse impact.

Nations like the US, Germany, France and Singapore among others have read the writing on the wall and stepped in with financial packages worth around US$ 160 billion to provide relief to the airline industry. Brazil has also announced a comprehensive relief package for its airlines fighting for survival…and the Chinese government has announced cash support to its carriers that operate international flights.

Before things get worse and they can, Scindia might want to discuss the bail out with deferred payments, less tax on fuel, lower interest rates on loans, anything that keeps the carriers alive and hoping for a better day.

Even the bigger fleets will hurt if they are not given buoyancy.

Low-cost carrier like SpiceJet had signed an agreement with Avenue Capital Group in the US for the sale and leaseback of 50 new planes to be ordered by the airline and that is now moot. Vistara, a joint venture between India’s Tata Group and Singapore Airlines was looking at Heathrow as a gateway but might think again. Indigo, the big boy of all the Indian carriers is also cash strapped.
Future plans are as pointless as a broken pencil.

The reluctance to save the world’s safest mode of transportation in a country like India is also predicated to a mind-set that still sees it as a luxury item, flying is not a common man consideration and therefore not a priority in the numbers game. This shortsighted approach could have a devastating impact on the comeback and it must not be allowed to gain traction. Despite that, India has shown such a sharp rise in recent years in its influx as a new generation clambers on-board. Ergo, it is convenience not luxury. Moreover, mass transportation will continue to increase if it is allowed to survive as an industry. Already over 50 airlines have closed operations globally. India’s 14 carriers hang in there but they need fiscal oxygen before they are compelled to join the ‘once they were’ line.

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