Today, one of the most critical questions in the world is till how long the Coronavirus is going to spread? The impact of this pandemic is clearly visible on the global financial market. One of the severely affected industries is the aviation industry - the airlines, airports and their ecosystems.

Financial Crisis
As a precautionary response to the novel Coronavirus outbreak, many countries around the world have shut down their borders, thereby limiting domestic as well as international travel and as a result, it has affected the entire aviation industry globally.

1. According to the International Air Transport Association (IATA), the annual revenue passenger kilometres (RPKs) for the aviation sector is estimated to fall by 55 percent resulting in a loss of approximately $113 billion. The outbreak is currently wreaking havoc and almost all airlines around the world have suspended their operations.
2. Moreover, airlines are also liable to refund unused tickets due to massive cancellations as a result of government-imposed travel restrictions. This will cause the second quarter liability to be around $35 billion and will result in a severe cash burn. Due to this, the IATA has also estimated that the airline companies are expected to burn $61 billion of their cash reserves during the April-June period.
3. However, countries like Brazil, Canada, Italy and the Netherlands have allowed airlines to issue vouchers in place of refunds. And, some airline companies are offering the rescheduling of flights. This will allow airline companies to preserve the cash that they need in order to run the cargo operations and will also allow them to restart their operations without any limitations once the pandemic is over.

The Indian Scenario

1. In India, medical evacuation flights, cargo flights, offshore helicopter operations, and flights which have got special permission from the Director-General of Civil Aviation (DGCA) are allowed to operate during this countrywide lockdown.
2. Since early 2020, flight tickets were already being offered at 20-25 per cent reduced rates. Further, the airfares are expected to remain subdued for the complete season after the lockdown ends.
3. Many airline companies are running low on cash reserves and are on the verge of bankruptcy. Adding to the crisis, there is also a rise in job loss and pay cuts. Some of the companies have even asked their employees to go on unpaid leaves for an indefinite period.
4. Moreover, many foreign carriers operating in India have been requesting the Indian government to provide them with a 30 per cent discount on aeronautical charges for a period of six months, to improve their financial condition.

It is a tough time for each industrial sector in the world, where everyone is bound to suffer from a financial breakdown. However, only time will be able to improve the situation. Till then, we have to stay strong and stand together in fighting this deadly invisible global enemy.

Source: International Air Transport Association, Director General of Civil Aviation, The Economic Times