India’s domestic carriers are making desperate attempts to stay afloat during the Covid-19 slump.
On May 28, low-cost airline SpiceJet said it has converted three of its Bombardier Q400 passenger aircraft into freighters. Other airlines are also considering the same move, industry sources told Quartz.
The decision comes at a time when passenger business is negligible as fewer people are travelling on domestic routes and international travel is suspended owing to the pandemic.
During this slump, some of the domestic carriers have been operating cargo flights on a commercial basis in addition to the aircraft being operated under Lifeline UDAN, a scheme launched for the movement of Covid-19 related essential equipment. This is helping the airlines find a “source of revenues as well as profits,” Kinjal Shah, an aviation analyst at credit rating agency ICRA, said.
Eyeing the future
Shipment delivery has come as a blessing in disguise as carriers were desperately looking to lap up anything that would save them from major financial distress.
“Cargo operations have become the only source of revenue for airlines as demand for essentials such as medical gear and consumables in India and outside remains high at the moment,” an industry executive told the New Indian Express newspaper on May 7.
Until May 28, SpiceJet had transported over 12,000 tons of cargo on more than 1,690 flights. The company is now looking to expand its international cargo operations to and from Sudan, South Korea, Singapore, and Hong Kong, among other places. On May 4, India’s largest airline, Indigo, said it had made three international cargo flights operational from Singapore and Maldives.
This cargo business, however, may not be enough to ensure financial success in the long-run, experts said.
Not enough to survive
Even as some funds trickle in from the freighters, carriers are focused on cutting costs.
“Many airlines have already started undertaking salary cuts for their employees, including leave without pay and laying off pilots and crew members,” Shah said. On May 30, low-cost airline GoAir announced a pay cut of over 60% for its senior pilots.
Despite these moves, the aviation industry is likely to have a really bad year. Analysts expect the demand for air travel to remain subdued for several more months, which would derail aviation companies’ expansion and new aircraft purchase plans. ICRA has predicted a de-growth of 44% for the Indian aviation industry for the FY21.
“Passenger traffic at airports is expected to remain under pressure for the first half of FY21, with some recovery only likely in the second half,” said Anupama Arora, aviation sector head and vice-president of ICRA. “As a result, passenger traffic is estimated to witness a sharp year-on-year decline of 45-50% in FY21.”