Recovery in domestic and international travel has been delayed by three and six months, respectively, due to Covid resurgence, said India Ratings and Research (Ind-Ra). The first two months of 2021 witnessed a solid improvement in air travel, after a steep decline in EBITDAR losses in 3QFY21 as airline operations normalised, it said.
However, late March and April have seen a sharp rise in active Covid cases all across India which has significantly impacted air travel and dented confidence in aviation recovery.
Besides, 2021 has brought three new challenges such as higher fuel expenses as crude prices recover amid a soaring global demand, rising competition intensity amid the possible re-start of operations by Jet Airways, and likely pressure on airline yields as the scramble for market share realignment to pre-Covid period begins.
“Ind-Ra believes the domestic air travel recovery should resume in three months, if the fresh Covid wave subsides. However, a meaningful international travel recovery is around six months away and contingent on the achievement of vaccination coverage for a significant proportion of the population,” the ratings agency said.
Furthermore, Ind-Ra expects regulator DGCA to continue to keep price controls in place till demand normalises and reaches closer to pre-Covid levels.
“However, the overall yields for two leading carriers remain at a weak level and largely in line with median yield level witnessed in the last five years.”
In addition, Ind-Ra’s baseline expectations for a partial but meaningful recovery in international travel have been pushed ahead by up to six months post the fresh wave of restrictions and will continue to significantly depend on a huge decline in active cases, coupled with achievement of mass vaccination coverage.
“Even when international travel resumes in 2HFY22, significant tourism and corporate demand may not recover immediately, given restrictions requiring travellers to quarantine for up to 10 days.”
“International Air Transport Association in a recent update on the global aviation recovery has highlighted that 89 per cent of airline travel remains down with cargo being the only bright spot.”
