The Aviation sector in India has been one of the fastest growing sectors during the last decade. Its contribution to the GDP has been close to 80 bn USD. In total, 14 scheduled airlines including scheduled commuter airlines operate in Indian domestic sector and rule over 98% domestic market share. This growth is going to take a drastic hit due to the present lockdown and suspension of domestic and international flights to contain spread of COVID-19. The revival and stabilization of this vital industry is likely to take some time. While all concerns are shown towards commercial airlines, General Aviation and businesses associated with General Aviation are not much talked about (for the obvious reasons of its low volume).
The General Aviation (GA), ground handling and Maintenance, Repair and Overhaul (MRO) related to Non- Scheduled Operators (NSOPs) have taken a severe blow due to COVID-19 and is likely to take much longer time to recover. As such, in a consistently growing industry, the share of General and Business aviation has seen steady decline in the recent years. Indian industrial and corporate houses have started to give up their Jets to contain cost due to the economic slowdown. Prominent among them is Reliance Transport & Travels Pvt. Ltd. leasing out one of its priced Global 5000 aircraft to a charter company. The number of flights undertaken by the private companies and charters have also seen a steady decline.
Impact on the Ground Handling and MROs associated with General Aviation
The capital investment in aviation and associated businesses are heavy. Therefore, in situations like this, the losses are also proportionate and grow exponentially with no inflow of revenue. The ground handling and MRO business have come to a grinding halt during this period. In a day only two or three flights are being operated under NSOPs at Delhi, compared to 40 to 50 flights a day during the same period last year. Revenue losses are further aggravated by cancellation of International flights, since the COVID outbreak in Feb 2020.
The business of MRO is directly related to the flying efforts. Drastic reduction in flights has direct impact on Base maintenance activity of the MROs. Reduced maintenance will have impact on business which will spread much beyond the lockdown period. The payments to MRO are generally linked to the post maintenance performance. Therefore, the recovery of payments takes anywhere between 3 to 4 months and this may see larger delays now. The deferred maintenance arising due to low intensity of flying, will add to the additional burden of payments towards salaries of skilled Engineers, manpower, rentals towards infrastructural and inventory holding, which are exorbitant and contribute towards major outflows.
Outlook: post lock down
The recovery of aviation sector will be longer compared to others. The commercial aviation will see reduction in number of passengers per flight for the reasons of social distancing. This will see steep rise in airfares and will virtually eliminate the concept of low budget airlines. Although the fuel prices are presently low, which will help in keeping the operating cost down, but this is likely to be for a short duration. International tourist charters and destination flying will see downward trend till the contagion is eliminated. Post Covid-19 lockdown, the corporate and business tycoons may prefer personal jet or charter airplane travel over the commercial, for fear of contagion and to avoid additional time taken to board and de-board due to the social distancing norms being enforced
Suggested Economic Support
Substantial support from the Government will be required for revival of aviation sector particularly Non-Scheduled Operations. Some of the measures that would require immediate attention are enumerated below:
- Reduction in airport royalty and concession fee.
- No rentals on land/ hangar/ paved land for certain period.
- Reduction in GST from 18% to 5% for the airport services.
- Subsidy on electricity and water charges.
The above views are expressed on Fixed Base Operators (FBOs), MRO service providers and Non-Scheduled Operators.This class of operators are likely to see closure of some entities unless substantial relief is given by the government.
NB: The data and figures quoted is taken from the open source information