There are two kind of people around the world, those who buy their air tickets basis the lowest price, and those who buy their air tickets basis the best their money can buy. Both approaches are fine as long as you get across to where you need to be. However, the COVID-19 pandemic has caused havoc with airline finances, and hence you should go for quality over price.
When COVID-19 was declared a pandemic in March 2020, it led to a grounding for over two months for all Indian carriers. Airlines were forced to refund customers for the cancelled tickets. Airlines are a money-intensive business, so they generate cash every day and pay their dues. An airline seat not sold is a perishable product.
When airlines could not operate, there was no income, and expenses lined up (including lease costs, salaries and so on). This got airlines on to a cost cutting spree where they did everything they could to slash costs, including getting their crew to take salary cuts. They also did not refund customers, instead giving them vouchers and asking them to use these for travel later.
How airlines dealt with COVID-19 cancellations
Various airlines have come back differently out of this near-death situation. IndiGo and Vistara are two airlines who have refunded almost everyone, but there are others such as Air India and SpiceJet who have been extending the credits and not refunding to the customers despite follow-ups.
Running an airline in India is not for the faint hearted, and almost every airline is running a loss. But the good ones are still finding financial backing from their promoters. Which brings me to the point of always looking into the airlines financials before you think of booking a ticket with them. After all, you don’t want to have your money go belly-up like when Jet Airways shut shop.
Go First (previously GoAir), ran a loss of Rs 470.29 crores in the period between April – December 2020, and had a consolidated loss of Rs 1,689.94 crores for the three financial years before that, as per the DRHP filed with SEBI for an IPO.
SpiceJet has a negative net worth as well to the tune of Rs 3,172 crores and has been reporting a loss in the past three financial years, as per exchange filings.
Air India has a cumulative loss of Rs 70,820 crores till March 2020 and has made a further loss of Rs 9,500–Rs10,000 crores in FY21, as reported by LiveMint.
Some airlines get fund infusion
Different airlines have found different ways to get out of this mess, and some have not. Vistara has received another Rs 750 crore fund infusion from Tata Sons and Singapore Airlines, as per new reports, in August 2021.
Go First is planning to raise money through an initial public offering (IPO).
As reported by Hindu Businessline, SpiceJet, on the other hand is trying to raise Rs 570 crores from banks. However, the promoter has refused to infuse fresh funds of his own, as per court filings. They have been recently sued by various parties, including aircraft maker De Havilland, the GST department and airline caterer, GateGourmet.
Unfortunately, the state of affairs might not be so great, as per an open letter written to the PM by a captain earlier employed by SpiceJet. The captain alleges that there have been instances of crew breaking down in the cockpit due to financial stress, and that the airline imposed a 70-85 percent cut since March 2020. Spicejet has denied these allegations.
You would then do well to purchase a quality airline ticket in these uncertain times, where it has increasingly become uncertain if you will be able to fly on that ticket or not. So don’t be penny wise pound foolish.
(Ajay Awtaney writes about Indian Aviation on livefromalounge. He tweets from @livefromalounge)
