COVID-19 relief package: Aviation industry disappointed as no direct benefits announced

The suspension of services and disallowing airlines to make advance bookings dried up all their major sources of revenue.

Published: 16th May 2020 09:27 PM  |   Last Updated: 16th May 2020 09:28 PM   |  A+A-

flights, airport

For representational purposes (File photo | EPS)

Express News Service

NEW DELHI: Announcements made by the Finance Minister Nirmala Sitharaman on Saturday to lift the cash drought aviation sector is not expected to bring any major relief to key players.

Contrary to their big ticket expectations such as direct cash infusion, bringing ATF under the ambit of GST and suspending airport charges, the Center on Saturday announced measures which were made previously with minor changes. 

"We will announce when we have something to announce," the FM said when asked about providing direct help to private airlines. Measures announced on Saturday were related to making India an MRO hub, better airspace management and privatizing airports.

"The measures announced on Saturday are all long term. The industry at large needed immediate direct benefit to survive from the impact of COVID-19 pandemic. Some of the airlines are on the verge of going bankrupt. We really expect the Government to come up with second round of measures," said a senior executive of a private carrier requesting anonymity.

Kuljit Singh, Transactions Partner, EY India, said that the government should address fund raising capability of airlines.

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"One challenge for private airlines in India is that these airlines have nearly all borrowings in forex  (by way of foreign aircraft leases or foreign EXIM backed loans) and have little collateral to offer for new loans (as they own a low percentage of aircraft, which are anyway mortgaged, and typically have negative working capital) and hence they may have difficulty in raising unsecured debt from Indian banking system to tide over these COVID problems."

"Therefore, the second phase may need to have more reforms in taxes on fuel, subvention for airport charges, government guarantees for additional unsecured borrowings of private airlines etc... Lastly, some of the private airlines may need to arrange for external equity capital, even at current depressed valuations, to tide over these unusual circumstances."

Analysts also raised questions on the government's expectation of big investment in airports. "Aviation has incentives as 6 airports to have PPP. The question is who will invest now when future of airlines is uncertain. The sector can garner investment but not sure if the Rs 13,000 cr expected will materialize any time soon," Care Ratings said in a note. 

Airlines in India have stopped flying passengers since late March due to the coronavirus outbreak. The suspension of services and disallowing airlines to make advance bookings dried up all their major sources of revenue. Barring IndiGo, all the major airlines are struggling to pay salaries to their employees.

Rating agency ICRA in a recent note said considering the daily net loss of Rs 75-90 crores during the shutdown of operations and the expected weak demand, the Indian aviation industry will require additional funding of Rs 325-350 billion over FY 2021-22. 



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  • docdolly hilbert

    they deserve it aivaiton executives are bufoons. Charles lindberg iv
    2 years ago reply
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