(Bloomberg) — Two of India’s most high-profile airlines are considering grounding planes as the coronavirus ravages travel demand, people familiar with the matter said.
IndiGo, Asia’s biggest budget airline by market value, has seen traffic slump as much as 30% in India, while its international flights have dried up following government restrictions on travel, one of the people said, asking not to be identified because the deliberations aren’t public. In addition to potential groundings, Vistara, the Indian venture of Singapore Airlines Ltd., is considering delaying delivery of some of the first batch of Boeing Co. 787 Dreamliners it has on order, another person said.
Should the pair go ahead with the flight cancellations, they’d join the growing number of airlines around the world doing so — United Airlines Holdings Inc. and British Airways’s parent recently announced capacity cuts — as the pandemic keeps people from flying. Indian carriers have avoided major reductions in flights so far but pressure is mounting as the number of confirmed cases climbs in the world’s second-most populous country.
Industry groups and analysts have issued dire warnings about the virus, with Sydney-based CAPA Centre for Aviation saying that most of the world’s airlines could go bankrupt by the end of May unless authorities step in. The International Air Transport Association said Tuesday that the global airline industry needs as much as $200 billion in government aid and bailout measures to survive the crisis.
With demand expected to fall at least 40-50% in the near term, India’s airlines may initially ground 150 aircraft, the local unit of CAPA said Wednesday. Even after a slump oil prices, the country’s airlines will lose $500-$600 million this quarter, excluding loss-making national carrier Air India Ltd., and that estimate may be revised downward.
“In the absence of a serious and meaningful government intervention, such an outcome could lead to several Indian airlines shutting down operations by May or June due to a lack of cash,” CAPA India said in a report. “Regardless of any fiscal concessions and support that the government may offer, most airlines will have to shrink their operations, and the more vulnerable carriers may shutdown.”
Both IndiGo and Vistara have yet to make final decisions on their plans to combat plummeting demand, the people said. Representatives from InterGlobe Aviation Ltd.’s IndiGo, which last week said its quarterly results would be materially impacted by the virus, declined to comment. Vistara, which is 51% owned by the Tata Group, said it wouldn’t comment on speculation.
Vistara will temporarily suspend all international flights until March 31, it said in a statement late Wednesday. The airline has also adjusted its domestic capacity for March and April due to falling demand, and may make further adjustments, according to the statement.
InterGlobe shares fell as much as 7.2% Thursday. They were trading down 4.2% at 910.5 rupees at 10:37 a.m. in Mumbai. Smaller rival SpiceJet Ltd. slumped 9.9%, hitting the daily limit.
Go Airlines India Ltd. also canceled several domestic flights on Wednesday after suspending international routes, airport websites showed. Representatives at the airline didn’t respond to requests for comment. It has also terminated contracts of all foreign pilots, according to a statement Wednesday.
Air-passenger traffic in India, one of the world’s fastest-growing aviation markets, rose 9% in February, data from the country’s aviation regulator showed Wednesday. While travel restrictions were being imposed elsewhere, particularly around China, India was largely unaffected last month, before the recent sharp escalation in travel bans globally.