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Thursday, January 21, 2021

After ‘worst year’, airlines await revival; govt to push AI, airports privatisation

While restrictions on travel have not been fully lifted, airlines are looking at potential revival of fortunes with the vaccine rollout.

Written by Pranav Mukul | New Delhi | Updated: January 4, 2021 1:12:57 pm
The new year could also see a possible revival of the grounded Jet Airways.

Almost half a trillion drop in revenue for the air transport industry, at least 43 commercial airlines gone bankrupt globally by October, close to 5 lakh jobs lost in the airlines segment — the year 2020, by various metrics, has been the worst year in the history of aviation as stakeholders across the spectrum struggled for survival because of the Covid-19 pandemic and the consequent travel bans.

While restrictions on travel have not been fully lifted, airlines are looking at potential revival of fortunes with the vaccine rollout. However, industry experts suggest that any hopes for a smooth recovery are still subdued — evident from the fall in airline stock prices last month on the news of a mutated coronavirus variant emerging from the UK.

“History books will record 2020 as the industry’s worst financial year, bar none. Airlines cut expenses by an average of a billion dollars a day over 2020 and will still rack-up unprecedented losses. Were it not for the $173 billion in financial support by governments we would have seen bankruptcies on a massive scale,” said Alexandre de Juniac, director general of International Air Transport Association (IATA).

“On the assumption that there is some opening of borders by mid-2021 (either through testing or growing availability of a vaccine), overall revenues are expected to grow to $459 billion ($131 billion improvement on 2020, but still 45 per cent below the $838 billion achieved in 2019),” he added.

In India, however, in addition to the vaccine rollout, there are several aspects being tracked by the aviation industry including disinvestment of Air India, revival of Jet Airways, impact of airport privatisation and an uptick in broad economic indicators that would result in a rise in demand for business travel.

For the Air India disinvestment, the government amended the terms of bidding several times over the last year as it continued to extend deadlines till December 14, when it finally received “multiple expressions of interest” from potential investors including the Tata Group.

A successful disinvestment of Air India would not only mean easing of the burden on the exchequer, that has been funding the loss-making flag carrier, but would also mean a level-playing field for private airlines, which have been competing with a player unperturbed by operations running in losses. The Centre is expected to inform the qualified interested bidders this month, following which the process of inviting financial bids would begin. Sources in the Civil Aviation Ministry have, however, indicated that the process is expected to close in the next fiscal.

A successful privatisation notwithstanding, Air India’s revival will also depend on the ability of the new investor to lose the flab by cutting down on loss-making routes and rightsizing the airline. Consequently, this would also result in the rest of the private airlines being able to compete with the national carier on a level-playing field — that had been skewed by taxpayers funding its losses.

In November 2020, Air India had the third highest market share in domestic air traffic at 10.3 per cent, behind low-cost airlines IndiGo at 53.9 per cent and SpiceJet at 13.2 per cent.

For other airlines in the country, domestic travel has been the lifeline that kept the light on after it resumed on May 25, after a two-month suspension. India’s largest airline IndiGo recently indicated that it has reached around 80 per cent of its pre-Covid capacity on the domestic front, but its international capacity was running only at 20 per cent of the normal levels. The airline expects to reach 100 per cent of its usual international capacity by the end of 2021, but that will — as senior government officials have stated for regular international air travel from India — depend on behaviour of the virus.

The new year could also see a possible revival of the grounded Jet Airways, with a consortium of UAE-based businessman Murari Lal Jalan and UK-based Kalrock Capital winning the bid in October to revive the airline.

While the consortium awaits approval from the National Company Law Tribunal (NCLT), it has laid down the plan for Jet 2.0, as per which it aims to take the carrier back into the skies by summer of 2021. The Jet 2.0 hubs will remain Delhi, Mumbai, and Bengaluru but the revival plan also proposes to support tier 2 and tier 3 cities by creating sub-hubs in such cities. However, in addition to the NCLT clearance, Jet 2.0 could also run into hurdles in acquiring slots that were once allotted to Jet Airways but were redistributed among other airlines once the airline went belly up in April 2019.

During 2020, the government managed to successfully privatise six airports — Ahmedabad, Mangaluru, Lucknow, Jaipur, Thiruvananthapuram and Guwahati — the first three of which have already been officially handed over to Adani Enterprises, which successfully won the rights to operate, manage and develop all the six airports in 2019. Going ahead, the Centre plans to disinvest at least six more airports. Privatisation of airports is said to result in higher revenue realisation for the Airports Authority of India, which has been thus far managing these airports.

“Indeed 2020 will go down the annals of aviation history as the watershed year for all the wrong reasons. Airlines bled with losses mounting crores per day. Allied industries such as airports, hospitality and travel trade have been hit hard as well. Thousands of travel agents have shut shop and many have been rendered jobless,” said Ankur Bhatia, executive director, Bird Group.

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