How the second Covid-19 wave could mar the summer of recovery for airlines

Last Sunday, as Prime Minister Narendra Modi was meeting top bureaucrats in the face of rising Covid cases, the CEO of a private airline asked his head of operations to prepare for a sudden grounding of operations.

Only a month before he had met investors, to convince them of total recovery and the bright future of Indian aviation. And now, the CEO was back to plugging daily cash burn.

Two weeks after many airlines had taken decision to roll back salary cuts encouraged by a steady increase in traffic flow, a second wave of coronavirus followed by rules of compulsory RT-PCR test has hit forward bookings, bringing back fears of the last summer, when the pandemic had overturned everything airline boardrooms knew about the business.

An official at Ministry Civil Aviation has occupancy in flights are down to 6 per cent from 70 per cent in the first week of March. According to calculation by airline lobby group IATA, low-cost airlines need to fly at 80 per cent occupancy to remain profitable.

“The rising number of cases have certainly deferred a recovery. But with increasing vaccination drive, I expect a total recovery in six to eight months,” said DGCA head Arun Kumar

Stunned by this sudden hit, talks of optimism and recovery have turned to more cautious look at aircraft deliveries and in some cases postponing fresh induction of aircraft. “ SpiceJet, AirAsia together were supposed to bring in eight new aircraft by the end of May. Those are in cold storage now as airlines are unsure on what demand will look like a month later,” a person in know development said.

The commercial head of a private airline who hasn’t taken leave since last March was planning a family vacation this April. “Forward bookings for 30 days are again plummeting. I have zero bookings for May. Just as things were looking stable, we had just started rebuilding schedules, with some predictability over occupancy. That is all gone now. I am frustrated and waiting for an end to these,” the person said.

Revenue management—the science of getting the highest price for a ticket is based on historical data. With big-data computing, airlines know with precision what the demand will be for the 2 p.m. flight to Mumbai on the third Thursday of April. Except that the changing pattern of the virus has thrown that out of the window. “For the summer schedule we were depending on historical data from 2019 thinking that things were back to normal. Now there is no relation. We are again flying blind,” a network planner at Air India said.

India’s largest carrier IndiGo which is clamoring to increase operations have gone on a wait and watch mode and sources said that schedules of pilots have been made for 15 days rather than usual practice of preparing it for full month.

“We are waiting and watching before taking a call. If asked for a comparison, I shouldn’t say that things are similar bad as last year but that predictability of booking which helps in preparing a robust schedule is lost again,” said an executive of the airline.

With around 280 aircraft in its fleet and international travel closed, network planner of IndiGo have been experimenting with new destinations since they still have plenty of aircraft and crews sitting around. Any further hit to demand would be damaging for IndiGo as it will find it hard to deploy aircraft profitably.

IndiGo CEO Ronojoy Dutta said that the predictability of demand depends on the sentiment and when people get afraid of the virus, bookings start to plummet. “It really is very news flow dependent. If the market is quiet, there is no big news coming, then the revenue is strong,” Dutta had said.

For the government too, eagerly looking for a successful sale of Air India, this has come as a rude shock. Officials at DIPAM, the nodal body looking to sell Air India now fear the financial bids which were supposed to come in by second week of May will be further lowered as revival of international travel now looks distant.

Airline executives fearing a washout of the summer schedule are keeping their fingers crossed and expecting that a simultaneous vaccination drive will help to control things to go out of control.

“We can only hope that people will be more responsible in their behavior and government in its vaccination plan so that our jobs are saved,” said a pilot of an airline.

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