The second wave of the COVID-19 pandemic with its scale and ferocity has struck down hopes for the early recovery of India’s commercial aviation sector. Air traffic halved in a few weeks, and many States have reimposed lockdowns to bring the spread of the virus under control. It was only in February that domestic air traffic was increasing on a daily basis, reaching about three lakh passengers per day, with air travel emerging as a preferred mode of travel due to safety, efficiency and reduced travel times. Now, however, it will be quite sometime before passenger sentiment turns positive again. The net result is that demand for air travel is unlikely to recover significantly in the short term, making for another year of degrowth and the second year of consecutive losses for the industry.
Double blow
“The twin shocks of the first and second waves, occurring in the space of a little of over 12 months, will leave a long-term structural impact. Supply-side risks have increased markedly, and were they to eventuate they would likely result in an imbalance in the competitive structure of the industry, possibly creating policy and regulatory challenges,” stated Centre for Asia Pacific Aviation India (CAPA India) in a recently released update on its report’ Key Trends in Indian Aviation in FY22’. This highlights the challenges should an airline fail to survive the pandemic, causing disruptions in available capacity, just as the failure of Jet Airways did in 2019. With the original National Civil Aviation Policy (NCAP) released in 2016 designed for a growth environment, CAPA India states that ‘Post-COVID there is a need for NCAP 2.0 – possibly as an interim measure - to support sectoral emergence from the crisis through the stages of survival, stabilisation, recovery and eventually expansion.’
However, despite demand uncertainty being exacerbated by the second wave and a likely washout for much of H1FY22, CAPA India expects domestic airline traffic for the year to remain higher than 5.3 crore passengers in FY21. Despite years of high growth and increasing passenger growth, India’s airlines have always remained vulnerable to market shocks. Pricing of airline tickets also remains a matter of concern and Indian carriers under-recovered approximately INR 5,000 (USD70) per passenger in FY21, the report states.
Consolidated airline losses for the 12 months ending 31 March 2021 will amount to approximately INR 29,200 crore according to CAPA India, and consolidated aviation industry losses for the same period will reach approximately INR 43,200 crore. It is estimated that 50% of airline fleets in India (approx 300-350 aircraft) remain grounded, burdening airlines with the costs of this idle inventory. The growing losses could also drive a phase consolidation within the aviation industry, and IndiGo remains, by far, the airline best placed to ride out the storm.
During the first wave of the COVID-19 pandemic, India halted domestic flights from midnight of 24 March 2020, allowing them to reopen two months later, on 25 May. The role of aviation in keeping the nation moving cannot be overstated, especially with regards to repatriation of more than 67.5 lakh Indian citizens and movement of cargo during the pandemic’s first wave and now for transfer of emergency aid to India from abroad and movement of essential supplies within the country.
Freight business a saving grace
For India’s airlines buffeted with travel bans and lockdowns, the consistent growth in their cargo businesses provides much needed relief. ‘CarGo has been a success story over the last year, scaling new heights and creating new records, but our belief in the cargo business goes beyond the special circumstances right now. IndiGo was already the largest cargo carrier in India before COVID-19, and we expect the market to continue to grow after the pandemic,’ Ronojoy Dutta, CEO and Wholetime Director, IndiGo said. CarGo is IndiGo’s dedicated cargo and freight business which was launched as a stand-alone revenue stream last year. IndiGo does not currently operate dedicated freighter aircraft, and all cargo is carried in the cabin and the belly of passenger aircraft.
This situation will change for IndiGo next year when it receives the first of four A321P2F (Passenger-to-Freighter conversion) aircraft. These are A321ceo aircraft that will be converted from passenger jets to a full freighter configuration by ST Engineering and Airbus JV - Elbe FlugzeugWerke (EFW).
IndiGo has already inked a Letter of Intent (LoI) for two aircraft and expects to conclude agreements for the remaining two with a lessor shortly. Delivery of the first aircraft is slated for the first half of 2022, with the remaining three aircraft to be delivered within the following year. The A321PF is substantially different from the passenger version with the addition of a large main deck cargo door in the forward fuselage, covered up passenger windows and deactivated passenger doors. The forwardmost left passenger door is replaced by a smaller one and the cabin is refurbished with a reinforced floor, rigid barrier wall. The A321P2F can accommodate 14 large containers/pallets on its main deck and 10 LD3-type containers on the lower deck. The aircraft can carry a maximum payload of up to 27 tonnes.
SpiceJet also operates a dedicated fleet of 19 cargo aircraft under its cargo arm called SpiceXpress. Its fleet comprises of five Boeing 737 freighters, nine Bombardier Q-400s and five wide-body jets including a Boeing 767 and Airbus A330 inducted in January. SpiceXpress’ mixed fleet of wide-body, narrow-body and turboprop cargo aircraft gives it the capacity to fly 600 tonnes of cargo daily to domestic and international destinations. It is also working to provide seamless and secure transportation of COVID-19 vaccines and has tied up with Brussels Airport to transport the vaccines between India and Europe. SpiceJet has operated 12,950 cargo flights carrying around 105,200 tonnes of cargo since the lockdown began in March 2020.