India’s airlines face collapse as Modi government refuses to rescue billionaire owners

Close to 3 million jobs and more than US$11 billion in revenue could be lost in India this year because of the pandemic’s effects on aviation

Airlines suffered a total collapse in demand from March to May and need as much as US$2.5 billion just to keep flying until the end of this year

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Aircraft operated by AirAsia, Vistara – a joint venture between Singapore Airlines and Tata Group – and IndiGo stand at Terminal 3 of Indira Gandhi International Airport in New Delhi. Photo: Bloomberg

Published: 9:47am, 1 Jul 2020Updated: 11:16am, 1 Jul 2020

With tiny airfares, high fuel costs and taxes on top, India’s aviation market was already one of the toughest around – but the coronavirus pandemic could be the final straw for some of the country’s airlines.

Indian carriers need as much as US$2.5 billion to keep flying, CAPA Centre for Aviation in Sydney says, and that may only last to the end of this year if they’re lucky. Airlines suffered a total collapse in demand from March 25 to late May as India banned commercial passenger flights as part of its virus lockdown.

Governments in Europe, the US and elsewhere have provided US$123 billion to support airlines through the Covid-19 crisis. But Prime Minister Narendra Modi’s administration, facing a widening fiscal deficit, has not doled out funds to individual industries or airlines backed by private businesses and, in some cases, billionaires.

The country’s airlines need significant investment or one or more will fail, said Satyendra Pandey, an independent consultant and former head of strategy at Go Airlines India. That puts them on track to follow the likes of Flybe Group in the UK, Virgin Australia Holdings and Latam Airlines Group in Chile into administration or collapse.

India’s airlines could go the way of Virgin Australia, which went into administration in April amid the pandemic. Photo: New Zealand Herald

“Airlines with weak balance sheets and inadequate collateral have survived by withholding payments to suppliers for two months and counting,” Pandey said.