India’s greatest airline IndiGo has proclaimed their loss which includes Rs 870.80 crore for March-quarter 2020. Last month, the country’s only cash-positive airline declared its depleting free cash flow of Rs 8928.1 crore on March 31 and Rs 9412.8 crore as of December 31, 2019, leading to the laying off of 10 percent of its workforce because of the economic crisis for which Covid-19 is responsible. This has caused panic among other airlines.
What forced IndiGo to expel their staff?
Owing to the suspension on domestic airlines from March 26 to May 24, a huge financial loss encircled the Indian airlines. The economic crisis led to the salary cut-off and dismissal of several aviation workers.
After the reopening in June, Indigo accomplished a record of a passenger load factor of 60.7 percent holding a market share of 52.8 percent during the whole month. The airlines had to discharge the pilots last month without paying the wages.
The lockdown has certainly affected the revenue of the aviation industry because of the weak demand for air travel.
Although the airline business has 85 percent fixed cost expenses the revenue generated in this business is highly putrescible because maintenance cost is too high. The prices of aviation turbine fuel which were once reduced have again been reset to the pre-lockdown period, making it difficult for the aviation sector to reduce the overheads because of the drastic decline in demand due to this pandemic situation while maintenance and fixed cost remains the same.
What impression will IndiGo leave after cutting of jobs?
The aviation industries are going through severe financial pressure. It is very difficult for released employees to find a new job in airlines. The Covid-19 is a pandemic indeed. Aviation consultancy firm CAPA India stated that the decision for dismissal of 10 percent of their employees by Indigo is “the beginning of a painful process for Indian aviation as things start to unravel from the impact of COVID19”. “It will be impossible to survive this crisis without a strong balance sheet”, the firm added.
What does the Airline sector say?
2020 is the worst year in aviation history and airlines in the Asia-Pacific region had to go through the most loss. This was announced by the International Air Transport Association (IATA). As pronounced by CAPA India, “Industry conditions are such that one or more airline failures appear inevitable. Airlines have limited options to turn to for funding except for their promoters, given that third-party investors will be reluctant to provide capital right now, and the government is unwilling to do so”.
Will the situation improve?
The demand for air travel isn’t expected to rise up anytime soon. Firstly, because of the ambiguous norms of state authorities with respect to lockdown and quarantine. Secondly, the fear of traveling that has risen due to this pandemic.