Here’s why experts don’t think Omicron will impact India’s aviation sector

Can the impending third wave of the coronavirus pandemic and discovery of the Omicron variant negatively impact Indian carriers? Well, the jury is still out with industry insiders saying that domestic operations are likely to remain largely unaffected with some impact visible only on international operations that anyway remain suspended.

According to data made available by the aviation regulator Directorate General of Civil Aviation (DGCA), total passengers carried by domestic airlines from January to October 2021 were over 6.20 crore as against over 4.93 crores in YoY comparison. This signified a growth of 25.88 per cent YoY and 70.46 per cent MoM, respectively.

Since October 18, scheduled carriers have been allowed to operate up to 100 per cent of their pre-COVID-19 capacity on domestic routes after the government suspended a capacity cap imposed on them following the resumption of flights in May 2020 after a two-month countrywide lockdown.

In the backdrop of the recovery, industry analysts and insiders don’t see the Omicron, flagged as a variant of concern by WHO since its discovery by South African scientists in November, having much of an impact.

“As it is still early days, it’s time to wait and watch. However, if there is a significant spike in the number of cases, the maximum impact will be on international travel. Domestic travel will be impacted to a much lesser extent and we don’t see much pullback there. Although there was a curtailment on the number of flights on domestic routes during the first wave, operations continued unabated,” said Jagannarayan Padmanabhan, practice leader & director transport & logistics, CRISIL Infrastructure Advisory.

An industry insider, on the condition of anonymity, told Business Today that, “The domestic aviation market has shown strong recovery in the past two quarters. Flight bookings for December and January are looking good and healthy with fares on many sectors showing brisk demand. It’s something the whole industry has been waiting for after a rough 18 months. If the new variant is found to be potentially serious, it may lead to tighter controls on air travel. However, the government needs to do a careful impact assessment.”

In FY2020-21, amid the coronavirus pandemic, the financial loss to Indian carriers was approximately Rs 19,000 crore, while in the case of Indian airports it was approximately Rs 3,400 crore, minister of state for civil aviation, VK Singh had informed Parliament during the monsoon session in August. Domestic air passenger traffic declined by 0.3 per cent in 2019-20 and by 61.7 per cent in 2021 due to the pandemic.

Temporary turbulence

The Omicron threat is looming large at a time when there is much activity in the sector.

In a notable development, in October, the government inked a share purchase agreement with Tata Sons for the sale of the beleaguered national carrier Air India. There is also much excitement in the industry around the launch of share market bull Rakesh Jhunjhunwala promoted Akasa Air and revival of Jet Airways. Jet’s shares rose by 5.6 per cent on Tuesday amid reports that the airline was in talks with aircraft manufacturers Boeing and Airbus for the purchase of nearly 100 narrow-body planes.

Meanwhile, the performance of airline companies listed on Indian bourses has been a mixed bag. In the January-December period, shares of InterGlobe Aviation, operator of the country’s largest passenger airline by market share, IndiGo, have gained 10 per cent year-to-date, while those of the second-largest player by market share, SpiceJet, were down 23 per cent year-to-date.

CEO of the soon-to-be-launched scheduled regional carrier, IndiaOne Air, Arun Kumar Singh, declared, “Owing to the nationwide vaccination drive and the prevailing healthcare regulations in the country, not much impact is anticipated domestically. The central government has kept the situation under tight watch. However, should a third wave of the magnitude of the second wave hit, then domestically the traffic may dip a bit. That said, domestic travel will likely recover to pre-Covid levels by the first quarter of 2022.”

Any turbulence is, therefore, expected to be temporary.

Also Read: Indian hospitality sector’s $15 bn revenue target hazy as Omicron threat looms large

Also Read: Economic activity eases slightly in Nov; Omicron fears loom on economic recovery

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