Impact of COVID on the Aviation Industry


As the country, home to the world’s fifth largest population, struggles to adapt to what is an unparalleled national lockdown, let’s take a closer look at how these constraints have impacted its aviation industry, which accounts for over $70 billion of GDP in the country. Given the existing lockout conditions, the Indian Aviation Sector could be looking at around $1.5 billion-$2 billion in losses, assuming a 25 per cent fall in industry revenues. It is ironic that the Covid-19 pandemic first resulted in a sharp decrease in crude oil prices, which should have stimulated the aviation industry’s growth, and then devastated the industry due to a lack of worldwide demand. If and when it happens after May 3, the instant relief to the Indian sector will certainly come in the form of commencement of domestic flights. However, Indian aviation regulator Directorate General of Civil Aviation allowed cargo flights, offshore helicopter operations, medical evacuation flights, and special flights.

The foreign sector will still be far from commencement and normalization for a month or two because most of Europe and the United States are still struggling under the epidemic of Coronavirus. It is not yet clear whether the Indian government, like other nations, is looking to provide the industry with any financial package that has been so greatly affected.

Airlines have a variety of choices to make, and they can take a number of actions to adapt, recover and prepare to succeed in the new normal like first of all, change the supply chain, adjust to customer behaviors, optimize loyalty, reassess investment, reimage partners, and protect the brand.

Beyond the pandemic
SpiceJet Ltd. Chairman and Managing Director Ajay Singh said it is time to take advantage of the Covid-19 crisis as an opportunity to bring about structural reforms in the aviation industry in the nation. India is preparing a rescue package worth as much as $1.6 billion for the aviation industry, which was damaged after the spread of coronavirus forced countries to close borders and bring air travel to a near-halt. The Ministry of Finance is proposing a plan that involves a temporary suspension of certain taxes imposed on the industry, including a deferment of the tax on aviation fuel, until the spread of coronavirus is controlled so that the aviation industry can return to its feet. The companies will be allowed to pay the interest-free taxes in the next tax cycle.

The rescue plan, proposed by India’s Ministry of Civil Aviation, is expected to cost up to 100-120 billion rupees ($1.3-$1.6 billion). Governments around the world are struggling to save airlines that have been forced to park airplanes and slash jobs as the virus is putting the brakes on traveling. The International Air Transport Association (IATA) reports airlines may need a bailout of more than $200 billion.