Amidst the grim coronavirus catastrophe, Indian Aviation Industry finally sees a silver lining as the Government is planning a rescue package worth $1.6 billion for the nation’s aviation sector, which has been battered by the pandemic. According to government sources, the nation’s Finance Ministry is considering a proposal that includes temporary suspension of most taxes levied on airlines, including a deferment of aviation fuel tax.
According to sources:
‘Taxes for the airlines could be deferred till the coronavirus spread is contained and the aviation sector can come back to its feet’.
The carriers could also be permitted to pay the due taxes interest-free in the next tax cycle. According to International Air Transport Association (IATA), airlines globally may require a bailout of more than $200 billion. Few reports also estimate that most airlines would not see the light of day without government help by as early as May 2020. While governments all over the world are scrambling to contain the effects of the pandemic, it is understandable that prioritising health care and resurrecting economy is the top most priority, ahead of travel, tourism and aviation.
In India, Vistara Airlines and budget carrier GoAir have already suspended their international operations. IndiGo, India’s biggest carrier, has cancelled several overseas flights and may be forced to park some planes as domestic air travel also falls. Global aviation consultancy CAPA’s India unit said that regardless of any fiscal concessions and government support, most airlines will have to shrink their operations and the more vulnerable carriers, like the country’s flag bearer, Air India, may shutdown. It is predicted that Indian airlines will report losses of up to $600 million for the January-March quarter, which could worsen if demand continues to fall.
The Indian Aviation Industry was already a battle ground to survive. In its report published on March 18, 2020, CAPA reported:
‘In the absence of 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.’
On average, airlines do need a load factor greater than 70% to break even. With load expected to be significantly less in subsequent months, tough times lie ahead for Indian Aviation. While this tax holiday will ease the situation momentarily, additional assistance will most definitely be required for the sector to survive.
What do you think about the development of Indian Aviation sector amidst the coronavirus pandemic? Do you think the sector has what it would require to make it through this chaos? Let us know in the comments!