Aviation in a Tailspin

COVID-19 Economy Magazine Travel

The Covid-19 pandemic is not only taking lives but jobs too. The travel and hospitality industries have borne most of the brunt and seem the hardest hit. With most of the world’s fleet of airliners parked and mothballed, airlines both national and international are struggling to sustain themselves. The International Air Transport Association (IATA) claims this has been the worst year for the airline industry ever. 

Crisil, a rating agency, predicts an annual loss of Rs. 1.1-1.3 lakh crores (trillion) for India’s domestic airline Industry.   

On 28th July 2020, Indigo, India’s biggest private airline announced that it would have to lay off 10% of their total staff and further imposed a second-round, 35% pay-cut on senior staff members. The airline’s loss estimate is close to Rs. 2,844 crores as revenue dropped by 91% in the June quarter, following a loss of Rs. 870.80 crores for the March quarter. Forced to operate on a lower cash flow of Rs. 8,928 crores at the end of March 2020, as against Rs. 9,413 crores at the end of 2019, Indigo now plans to take even more stringent steps towards cutting overhead costs as revenues continue to spiral downwards.  

A similar situation has also befallen the government’s Air India. The collapse in air travel threatens the livelihoods of over 50% of the airline’s staffers. Air India has resorted to furloughs to make ends meet. The airline, on 15th July 2020 announced a scheme under which employees, based on metrics like performance and health, can avail of leave without pay from 6 months to 2 years, which can be extend to 5 years. Just two days later, the civil aviation minister announced that a substantial disinvestment in Air India “is the only option”.  

International airlines also face a bleak future as the world’s biggest airline networks suffer major losses. United Airlines of the US, one of the biggest players, sent layoff notices to almost 50% of their US staff, which puts 36,000 livelihoods at risks. American Airlines’ CEO Doug Parker said that their revenue has shrunk by 80% in June. American Airlines has also issued a Workers’ Adjustment and Retraining Notification to 37% of their staff, a warning of imminent layoffs.  

The ramification of the low demand has created deep discomfort among airline manufacturers. Raytheon Technologies Corp. laid off 8,000 of their employees as buying and leasing of airliners have halted. The company produces jet engines and aerostructures. Due to cost cutting, airlines have decided not to commission new airliners as thousands already in commission collect dust in sheds.  

The IATA recently stated that full recuperation of the airline industry to pre-Covid levels is expected by 2024. “Consumer confidence is depressed … and in many parts of the world infections are still rising,” said Alexandre de Juniac, CEO of IATA. The airline industry, like much of the the world economy, is in a slump and will take longer than expected to stabilize. 

As the world cautiously opens up, domestic commercial flights have also started taking off in India. But their finances remain a challenge. The domestic market is operating at 56% of pre-Covid levels. Recently, the Indian civil aviation ministry extended the ban on international flights. Tickets booked for flights till 31st December were cancelled, resulting in further losses for the airlines. Air Asia India, the subsidiary of the Malaysian airline, is planning to exit the Indian market, ending the Tata-AirAsia joint venture as it faces huge financial losses.  

Covid has sent the aviation industry into a tailspin, from which it will require great skill and resilience to recover.  

Leave a Reply

Your email address will not be published. Required fields are marked *