November 2020

The aviation sector has been the hardest hit by the pandemic and the associated lockdowns. The one saving grace might be lower fuel costs but that hardly compensates for the catastrophic drop in passenger and cargo traffic. In addition, there are costs associated with inducting technology for the purpose of safely ushering passengers through the entire process of check-in, flight and exit.

This paradigm of physical distancing coupled with the use of technology will remain the new normal even after the pandemic ends. Traffic recovery, however, could take a very long time – the estimates range to upwards of two fiscal years.

Given the circumstances, airlines and airports that have suffered losses thus far, through 2020-21, will struggle to stay afloat in the short term. However, a surprising amount of activity has continued in the sector, with stakeholders displaying optimism about the long term.

The privatisation drive has continued, with the Adani Group winning the new round of airports on offer, by offering a significant premium over its competitors in the auctions. Did Adani pay too much? Reaching break even is going to take a while.

There has also been some movement on key greenfield private projects such as Jewar airport in Noida, Navi Mumbai airport and Mopa airport in Goa. AAI is also continuing with its policy of capacity creation, despite taking a financial hit. Policymakers are focussing on building regional connectivity as well as metro capacity, with more routes being created.

The move towards contactless processing of passengers will continue and it could eventually result in a smoother, faster experience for travellers. It may even result in cost savings, as it is less manpower intensive. Airlines are also trying various strategies to improve their revenues – Spice for instance, is focused on building cargo traffic.

The global aviation sector is just as badly affected as the domestic sector, and for the same reasons. Various countries have also put different and conflicting travel advisories and health-check/quarantine requirements in place. It could take a while before operational stability and consistency is achieved across the international aviation space and India’s aviation sector and policymakers must brace themselves to handle the situation as it evolves.

Optimism about the sector’s long-term prospects is the justification for the continuing investments in areas such as capacity creation and privatisation. There are likely to be plenty of opportunities for entrepreneurship. But it will be a long haul.

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