Aviation Industry is one of the hardest-hit sectors after the COVID-19 outbreak. The sector has seen gradual opening post lockdown and domestic traffic has been returning. However, it continues to remain far from the pre-COVID-19 levels. As per the preliminary estimates by airlines, the sector may see a 60-70% reduction in international traffic and up to a 40-50% drop in domestic traffic in the current financial year.
What measures are the government taking?
The government has been supportive so far by relaxing the operating capacity norms. The industry was allowed to resume its operations on 25 May with 33% capacity which has now been increased to 60%.
After the resumption of aviation activity, the number of passengers has increased from 30,000 to 1,20,000 per day. Minister for Aviation Hardeep Singh Puri expects the number to reach beyond 2,00,000 during the festival season with various state governments easing their norms.
The minister also stated that the decision to increase capacity further will depend upon the demand environment. How the virus behaves in the coming months is also important as various state policies will be shaped up accordingly.
In further support to the industry, the government has reduced GST to 5% from 18% earlier, on maintenance, repair, and overhaul (MRO) services. It has also lowered fuel prices at a time when the sector is operating only with limited capacity. The ATF prices fell from 43,933.53 per kl to Rs 42,447.91 from August 1 to September 1, which will help the industry to recover some losses.
International flights remain under a cloud:
International flight resumption remains suspected in the foreseeable future as many nations insisting on signing bilateral civil aviation agreements under which two countries can operate to and fro flights with some restrictions.
India has signed 8 such agreements so far with the United States, the United Kingdom, France, Germany, the United Arab Emirates, Qatar and the Maldives. The aviation ministry is also negotiating with 13 more countries including Australia, Italy, Japan, New Zealand, Nigeria, Bahrain, Israel, Kenya, Philippines, Russia, Singapore, South Korea and Thailand.
Key takeaways: The aviation sector continues to face severe headwinds in terms of financial strain and lack of demand for its services. The partial lift in lockdown norms and increasing capacity surely is a step taken towards normalcy. However, the recovery path remains long and unpredictable. Considering this, we continue to maintain #Mandi outlook on the sector.
