Coronavirus outbreak: Airlines stare at uncertainty this quarter; situation likely to improve in next 3 months

Lower oil prices and possibility of a spurt in domestic passenger traffic due to international travel restrictions would benefit the domestic airline industry.

Press Trust of India March 13, 2020 10:08:51 IST
Coronavirus outbreak: Airlines stare at uncertainty this quarter; situation likely to improve in next 3 months

New Delhi: Skies are cloudy for carriers in the current quarter as they navigate the coronavirus outbreak but the next three months might turn out to be better, according to two airline industry executives.

Lower oil prices and possibility of a spurt in domestic passenger traffic due to international travel restrictions would benefit the domestic airline industry, they added.

In the wake of the coronavirus outbreak, domestic carriers have reduced the number of international flights. On Wednesday, the government also decided to suspend tourist visas from 13 March till 15 April.

Coronavirus outbreak Airlines stare at uncertainty this quarter situation likely to improve in next 3 months

Representational image. PTI

SpiceJet Chairman and Managing Director Ajay Singh on Thursday said the aviation sector is under a lot of pressure but this is temporary.

"We have been here before. SpiceJet is far better placed than many others to weather this turbulence. I firmly believe that this is an opportunity for SpiceJet, for the government and the aviation ecosystem to create more efficient and viable structures for the growth that lies ahead.

"SpiceJet will emerge even stronger from this," he said in a statement.

Noting that the Indian aviation market, especially the domestic space, has immense potential, he said it would remain amongst the fastest growing in the world.

Since there are travel restrictions till 15 April, domestic air traffic might start increasing as the people who had planned their vacations abroad would look for domestic destinations, according to a senior airline industry official.

As a spillover effect of international travel restrictions, the overall load factor and yield in the domestic sector might also go up, he noted.

Generally, yield refers to money made by an airline on every seat occupied.

"Some of the grounded capacity from the international will be redeployed in domestic routes...," he said, adding that airlines could see a better June quarter, especially on account of lower fuel prices.

Another executive said there would not be any massive impact on SpiceJet as it has less international operations. Also, excess capacity in overseas routes can be deployed in the domestic sector and leases of aircraft taken for short term might not be renewed, the executive added.

The fall in oil prices would also be a silver lining for the airline industry.

Due to various factors, including the coronavirus outbreak, oil prices have been sailing south in recent days. On Thursday, Brent crude oil futures declined over 5 percent to $33.82 per barrel.

Fuel cost accounts for around 40 per cent of an airline's operational expenses.

There is a lot of scope for cutting costs, the executive said.

A Vistara spokesperson said that business on some of its international and domestic routes has been impacted. "We are reviewing the situation everyday and remain nimble in our approach," the spokesperson added.

Companies as well as individuals who choose charter services have started taking precautionary measures and are refraining from travel, JetSetGo Founder and CEO Kanika Tekriwal said.

JetSetGo Aviation is an aircraft management company.

"Due to coronavirus, in private aviation we definitely have increased requests for international flights where travel can't be avoided as passengers are willing to avoid the exposure that commercials might bring them. But at the same time we are also witnessing a decrease in travel altogether," she added.

Shares of airlines took a beating on Thursday, with IndiGo tumbling over 11 per cent. On Wednesday, it said that quarterly earnings would be hit due to fall in daily bookings amid the coronavirus outbreak.

SpiceJet dropped over 19 percent.

On March 9, the Airports Council International (ACI) said prolonged duration of the coronavirus outbreak could result in a revenue loss of $3 billion for airports in the Asia-Pacific region.

Asia-Pacific is suffering the highest impact, with passenger traffic volumes down 24 per cent for the first quarter of the current year, compared to projected traffic levels without COVID-19, as per the ACI World estimates.

ACI is a grouping of airports. It serves 668 members, operating 1,979 airports in 176 countries.

The International Airport Transport Association (IATA), on March 5, projected that the airline industry could lose up to $113 billion in revenue this year due to the impact of the coronavirus outbreak.

The grouping's previous analysis, issued in February, put the lost revenues at $29.3 billion. This was based on a scenario that would see the impact of COVID-19 largely being confined to markets associated with China.

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