Covid-19 wrecks airline finances: Choose your carrier carefully before booking
Running an airline in India is not for the fainthearted and almost every airline is running at a loss
There are two kinds of people around the world, those who buy their air tickets on the basis of the lowest price and those who buy their air tickets based on the best their money can buy. Both approaches are fine as long as you get across to where you need to be. However, the Covid-19 pandemic has played havoc with airline finances, and hence, one should opt for quality over price.
When Covid-19 was declared a pandemic in March 2020, it led to the grounding of all Indian carriers for over two months. Airlines were forced to refund customers for cancelled tickets. Airlines are a money-intensive business, so they generate cash every day and pay their dues. An airline seat not sold is a perishable product.
When airlines could not operate, there was no income, and expenses lined up (including lease costs, salaries and so on). This sent airlines on a cost-cutting spree, where they did everything they could to slash costs, including getting their crew to take salary cuts. They also did not refund customers, instead giving them vouchers and asking them to use these for travel later.
How airlines dealt with Covid cancellations
Various airlines have come back differently out of this near-death situation. IndiGo and Vistara are two airlines that have refunded almost everyone, but there are others such as Air India and SpiceJet, who have been extending credit and not refunding customers despite follow-ups.
Running an airline in India is not for the fainthearted, and almost every airline is running a loss. But the good ones are still finding financial backing from their promoters. Which brings me to the point of always looking into the airlines’ financials before you think of booking a ticket with them. After all, you don’t want to have your money go belly-up like when Jet Airways shut shop.
Go First (previously GoAir), ran a loss of Rs 470.29 crore in the period between April and December 2020, and had a consolidated loss of Rs 1,689.94 crore for the three financial years before that, as per the DRHP filed with SEBI for an IPO.
SpiceJet has a negative net worth as well, to the tune of Rs 3,172 crores, and has been reporting a loss in the past three financial years, as per exchange filings.
Air India has a cumulative loss of Rs 70,820 crore till March 2020 and has made a further loss of Rs 9,500–Rs10,000 crore in FY21, as reported by LiveMint.
Some airlines get fund infusion Different airlines have found different ways to get out of this mess, but some have not. Vistara has received another Rs 750 crore fund infusion from Tata Sons and Singapore Airlines, as per new reports in August 2021.
Go First is planning to raise money through an initial public offering (IPO).
As reported by Hindu Businessline, SpiceJet, on the other hand, is trying to raise Rs 570 crore from banks. However, the promoter has refused to infuse fresh funds of his own, as per court filings. They have been recently sued by various parties, including aircraft maker De Havilland, the GST department and airline caterer, GateGourmet.
Unfortunately, the state of affairs might not be so great, as per an open letter written to the PM by a captain earlier employed by SpiceJet. The captain alleges that there have been instances of crew breaking down in the cockpit due to financial stress and that the airline imposed a 70-85 per cent cut since March 2020. Spicejet has denied these allegations.
You would then do well to purchase a quality airline ticket in these uncertain times, where it has increasingly become uncertain if you will be able to fly on that ticket or not. So don’t be penny wise and pound foolish.
When Covid-19 was declared a pandemic in March 2020, it led to the grounding of all Indian carriers for over two months. Airlines were forced to refund customers for cancelled tickets. Airlines are a money-intensive business, so they generate cash every day and pay their dues. An airline seat not sold is a perishable product. When airlines could not operate, there was no income, and expenses lined up (including lease costs, salaries and so on). This sent airlines on a cost-cutting spree