Prepare for the short term ADTOI expects hotel refunds
The Indian aviation sector is likely to shrink significantly, even if some of the vulnerable airlines manage to survive. CAPA India suggests that airlines make quick decisions for their short-term business plans.
TT Bureau
CAPA India says that when services resume, airlines will have to publish a schedule, which will require decisions to be made with respect to which routes to launch first and with what level of capacity, without knowing until much closer to the date of departure whether demand actually exists. Some carriers may decide to operate a skeleton network only.
Airlines will have to make quick and difficult decisions for their short-term business plans:
vNetwork and fleet strategies will require urgent attention, as retaining pre-COVID operations will not be feasible. Scheduled aircraft deliveries will need to be deferred
for at least 12 months. These decisions may need to be taken in the absence of much forward visibility about the direction of the market and the economy. International operations, especially longhaul services, will likely be the most difficult segment for which to project demand.
vWith FY2021 set to be an exceptionally challenging year, all segments of the aviation value chain will need to immediately start planning for much smaller scale operations, supported by serious enterprise-wide restructuring. High profile airline failure such as Kingfisher and Jet Airways were arguably brought down because they did not rightsize when necessary.
vAs the saying goes, ‘never let a good crisis go to waste’. This may be the best opportunity for Indian carriers to make difficult calls to rationalise their operations and clean up their balance sheets. Consolidation, collaboration and supply-side correction should enable airlines to move away from market-share driven strategies such as loss-leader pricing. Aggressive expansion without the necessary cash and balance sheet has been repeatedly shown to be a very high-risk strategy. The US has been the world’s most profitable airline market largely as a result of the consolidation that took place in the aftermath of the Global Financial Crisis.
government will also need to take important policy and regulatory decisions. One of the recommendations that CAPA Advisory has regularly proposed is the introduction of a requirement for airlines to hold cash balances that can support at least three, and ideally six, months of operations in the absence of revenue, in order to be able to both obtain and to renew an AOP.
ADTOI is in touch with the Federation of Hotel & Restaurant Associations of India (FHRAI), which in turn has been convincing its members to give full refunds to agents.
While travel in general is expected to take its time to recover, domestic tourism could be the first to convalesce. Until that happens though, domestic tour operators find themselves in the same boat as others. Speaking about what their members are up to these days,
Dharmendra Singh Chauhan,
Maharashtra Chapter Chairman, Association of Domestic Tour Operators of India (ADTOI), says, “Right now we are attending webinars and regularly talking to our members via video calls and keep them motivated and discuss future strategies for reviving domestic tourism.”
Once the lockdown is lifted, he plans to travel within Maharashtra to create awareness among clients and ensure them that everything is okay on the domestic front so that they can start to plan their holidays. “Last week we conducted two Zoom meetings with our ADTOI members. One was a casual meeting as a stress buster and one was regarding refunds of hotel bookings and airline bookings. About hotels refunds, we are in touch with the Federation of Hotel & Restaurant Associations of India, and they are convincing the authorised hotels for giving us full refunds,” he says.
With regards to airline refunds, he says that all airlines are giving only credit for six months to one year to use the booking amount. “Our tour operators are convinced about that. In the current situation, we all understand that the entire tourism industry is bleeding, so we need to support each other,” Chauhan says, adding, “As an association of domestic tour operators, we all are working day and night along with the Ministry of Tourism and other government to help our members survive after the lockdown. We are hopeful that the government will support us to keep the tourism industry alive, especially since February, March and April are the last three months of the season for our inbound guests. India’s only hope now is the domestic tourist.”