Difficult times for Indian Airlines
The Coronavirus-hit markets are already impacting the global civil aviation sectors including India where one of the largest airline privatization initiatives is expected to be further delayed.
International Air Transport Association (IATA) experts could painted scenarios of airline revenues dropping with the fall in passenger traffic in the coming months.
Speaking at a press conference after a two-day workshop on 5 Mar 2020 in Singapore, IATA Chief Economist Brian Pearce said: “I think it is going to be very difficult times for the (Indian) airlines”.
Air India’s disinvestment process might be “quite difficult at this moment” amid the coronavirus outbreak, which will hit the global market for Indian carriers as well as inbound tourist traffic into the country, Pearce believes.
“Clearly, the international market for Indian carriers is going to be a lot weaker and inbound tourist traffic is going to be hit very hard by the effect of the coronavirus crisis,” he told Press Trust of India in Singapore.
“Privatisation of Air India is a necessary step for the long-term for the (good of) Indian market,” he said. The Indian civil aviation market, one of the fastest growing in term of passengers, badly needs consolidation.
Indian airlines, like a number of financially fragile carriers, are cash-strapped and impacts the financial markets, according to market observers.
The first airline victim of coronavirus is Britain’s Flybe which had to ground all flights on 5 Mar, according to reports from London.
The ‘Limited Spread’ scenario implies a US$63 billion loss of passenger revenues worldwide in 2020. The ‘Extensive Spread’ scenario implies a US$113 loss of passenger revenue worldwide in 2020, according to Pearce.
In Feb 2020, IATA has put the revenue loss at US$29.3 billion based on a scenario that COVID-19 would largely be confined to markets associated with China.
But the virus has spread to over 80 countries and is still spreading, with India just beginning to report increasing number of cases as it was not so a month ago.
Forward bookings have been severely impacted on routes beyond China, according to IATA.
A Turkish Airline plane flew out of Singapore early morning on 5 Mar 2020 with just pilots and crew members, as it has arrived with a coronavirus-infected passenger and had to offload, reportedly, 200 passengers at the the city state’s Changi Airport.
The outbreak is taking a toll on the global airline industry, especially due to travel restrictions. Corporate travels have been cut with all international communications going through tele-conferences while international events, especially for April to June, were cancelled or being cancelled.
The COVID-19 has infected over 95,000 people and resulted in more than 3,200 deaths worldwide as of 4 March 2020.
The Indian government plans to sell 100%.
Pearce said that Indian should see consolidation to sort out the Air India privatisation but pointed out that equity markets are already quite weak at the moment. The industry is being hit by the shock of the coronavirus, he added.
“That makes it quite difficult at this moment,” Pearce said in response to a question regarding Air India disinvestment.
On 4 March 2020, the Indian government announced permission for Non-Resident Indians (NRIs) to own up to 100% stake in disinvestment-bound Air India, the much awaited initiative that became untimely as the global financial markets are already reeling under a slower global economic growth made worst by the coronavirus.
Pearce pointed out that the equity markets are already quite weak at the moment and the industry is being hit by a shock of the coronavirus.
There is no answer to the gestation period of coronavirus at this stage as reports of people infected by the deadly disease have just about started appearing from over 80 countries.
Financial markets have reacted strongly, said IATA. Airline shares prices have fallen nearly 25% since the coronavirus outbreak. This is some 21 percentage points greater than the decline that occurred during the SARS crisis of 2003.
Singapore Health Minister Gan Kim Yong has already warned of need to live with COVID-19 for a long-time as the diseases outside China continues to grow at “alarming rates”. fiinews.com
