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When And How Will Aviation 2.0 Take-Off?

May 21, 2020 Headline News No Comments Email Email

Grounded aviation services for the first time since inception, due to unprecedented global pandemic are essential for revival of shattered economies. When and how will the second phase of aviation take off in this volatile situation is being predicted by many industry insiders.

Kapil Kaul, CEO-Indian Subcontinent and Middle East at Centre for Asia Pacific Aviation (CAPA) said:

“Road out of lock down is complex. Financial and operational challenges associated with the

resumption of services potentially so significant, some carriers may choose to remain grounded

whilst some others may not survive. Assuming that air services resume from 1 June 2020, after two months of lock down that followed sharp decline of traffic in March, four months from June to

September will be a critical phase. This includes the weakest period of the year for air travel in India, even at normal times.” International flight services in India were terminated on 15 March and total

Lockdown was in place from 25 March till 17 May, Monday. Flight operations are yet to open-up.

Amitabh Khosla, Country Director- India,  International Air Transport Association(IATA), said:

“According to our analysis,  India will face a 47 percent drop in passenger demand this year

compared to 2019. Passenger revenue for all carriers operating to India will be severely  impacted

with a USD 11.2 bn fall from 2019. As many as 3 mn jobs in aviation and allied sectors are at risk.”

Kapil Kaul, CEO &Director, CAPA South Asia

Mr Kaul expects several new challenges becoming apparent when services resume, owing to

battered state of the economy. Some carriers may even struggle to cover their variable costs up untilthe end of second quarter of financial year 2021 due to market constraints and constraints imposed by possible social distancing requirements. Thus airlines will have experienced six months with little or no contribution to fixed costs.

Madhav Oza, Director, Blue Star Air Services

Travel agents survival is tough too. Madhav Oza, Director, Blue Star Air Services, said: “With no

revenue to sustain expenses, it will be very difficult to retain skilled team. Maintaining technology is expensive too. Airline and travel industry is expecting the government to extend help.” Blue Star Air Travels is among the top Indian consolidators of air tickets and has 151 staff at its 26 sales offices across India. It had a turnover of INR 9 bn in 2019-20.

Newly proposed standard operating procedure requires airlines to keep the middle seat vacant and also reserve last 3 rows for a passenger that might need to be quarantined mid-flight. Thus, an

airline can only sell a maximum of 108 seats on a 180 seat narrow body aircraft.

Mr Kaul said:” Demand conditions are expected to be so weak that passenger loads are in any case

unlikely to be any higher than that. This will increase average break-even fare. Turnaround times

may increase as a result of increased sanitation requirements and revisions to passenger facilitation processes to maintain social distancing. Aircraft utilisation will decline and unit costs would rise.

Average break-even fares to meet variable cost would increase by 40 to 100 percent.”

Amitabh Khosla, Country Director, IATA

Accordingly, A New Delhi-Mumbai flight ticket that was available for Rs 2700 would cost (to meet

variable cost) Rs 5300 with social distancing and reduced utilisation and the same will cost Rs 9700 if the airline has to meet its total costs

Oza feels that with conditions of social distancing, international travel appears to be a distant dream.He expects road travel for short haul as well as long haul domestic travel with intermediate

stopovers to become imminent till aviation services and airfares get back to normalcy.

Andrew Ward, Vice President Marketing & Customer Experience, Jazeera Airways predicts two

scenarios to emerge, one which is grim and the other, just the opposite- ‘travel uncorked’, a high

demand scenario, which the Chinese are calling it a ‘revenge spending’ or ‘revenge travelling’.

There’ll also be surge in demand for VFR(Visiting Friends and Relatives). We shall discuss these in detail in the next article.

Written by Anand & Madhura Katti

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