Aviation has been among the worst hit sectors globally. Post gradual reopening of the economy which started in the first week of May 2020, Airlines too were allowed to resume operations domestically but at a much reduced capacity. This meant, that the higher load factors which were key for the profitability of airlines, would remain artificially contained. With businesses too excusing themselves from air travel for their employees, airlines just had a lot more to fend for.

A lot of water has passed ever since, and its been almost a year since the lockdown was first introduced in March 2020. The sector definitely has come with terms as far as profitability and load factors are concerned. And at this rate, it may remain sideways for another year or more.

Source: Airport Authority of India

International operations continue to be tightly regulated and normal operations are restricted till end of March 2021. There have been new pockets and newer viruses emerging across new geographies, and the Government is definitely not willing to take any more chances.

Till October: On the domestic air traffic front, 28 airports (21 international ones & 7 JV airports) which contributed to 82.7% of the total domestic traffic in the April-October period of 2019, recorded a decline in total share at 79.4% during the April-October 2020 period. Much of this share has been taken over by the 58 domestic airports, whose share has expended by over 200 bps to 9.5% in the April-October 2020.

Till January 2021: For the 10 month period, the share remains more or less in line with the April-October period. Thus on the domestic passenger front, efforts to make air travel a more “Common Man” friendly transport medium seems to be gaining traction.

Drop in passenger numbers:

Domestic airports seem to be the least affected, recording a 60% drop in traffic during the April-January 2021, where as 7 JV airports traffic reported a massive 75% drop in domestic traffic. 21 international airports too reported a 72.7% drop in traffic during the corresponding period. 

While pandemic did impact the industry in all possible ways, but one less thing to worry during this phase were crude prices. But with the commodity markets touching new highs, ATF prices are expected to remain high for the sector, which should be a definite reason to worry for the industry. Brent crude prices continue to remain at $65+ levels during 2021, and there doesn’t seem to be any relief in sight. With recovery not in sight for the short to medium term, airline industry may have a lot to handle in the coming months.

With all sort of taxes which impact the sector broadly, it is to be seen, if the Government plans to lower taxes for the sector, given the high rate of uncertainty.

By – Ashish K Nainan (Aviation Analyst)

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