The air demand recovery for Indian aviation industry remains uncertain, especially international traffic in 2021 in the wake of novel coronavirus pandemic, aviation consultancy firm CAPA India on Tuesday said.
Releasing the 10 key issues to watch in Indian Aviation in 2021, the firm also added that long haul traffic, in particular, is likely to take some time to repair.
“FY2022 is expected to be another year of large losses for the entire industry, but especially airlines,” said CAPA India in its report about the ‘top ten trends to watch in 2021’
The report said consolidation is inevitable in the Indian aviation sector and it could result in a “2-3 airline system” in the near to medium term.
“The structure of competition may change in the near to medium term, possibly resulting in a two-horse race in both the airline and airport sectors,” it mentioned.
Terming governments commitment to the privatisation of Air India as laudable, the report further states, “After almost 30 years of deregulation a largely market-driven sector will finally emerge from 2021, with long term strategic implications for consumers, competition and industry structure. The government’s commitment to the privatisation of Air India is laudable.
The report said lenders and investors will remain wary of the sector (especially airlines) unless the government intervenes in the form of sector-specific policy measures.
It stated the government may be tempted to maintain price floors and caps, at least for the first half of 2021.
When India resumed scheduled domestic passenger flights from May 25 amid the COVID-19 lockdown, floors and caps were imposed on fares based on the duration of the flights.
The report also said IndiGo will emerge from COVID significantly stronger relative to the competition, largely due to its very strong balance sheet.
It said international flights are expected to continue operating under “bubble arrangements” rather than bilateral air services agreements for the foreseeable future.
Scheduled international passenger flights were suspended in India on March 23 last year due to the pandemic-induced lockdown. Since July, airlines are operating special international flights under air bubble arrangements formed with around 24 countries.
Under a bilateral air bubble arrangement, airlines of the two countries can operate flights between their territories with certain restrictions.