Fear of airline bankruptcies triggered knee-jerk opening; but states not playing ball

Fear of airline bankruptcies triggered knee-jerk opening; but states not playing ball

Aviation Minister Hardeep Singh Puri's plea for 'cooperative federalism' shows that Centre anticipated some resistance to reopening domestic flights; they why were flights restarted without consulting the states?

Precarious and worsening financials of some of India's biggest airlines, including the state-owned Air India's - may have been a key reason behind the Centre's sudden decision to start flights even before working out crucial details with state governments.

With states refusing to play ball, some due to political rivalry while others for fear of spreading coronavirus, it's the unsuspecting flyer who is bearing the brunt of the Centre-state disharmony.

Keeping the passengers' issue aside for a moment, the question that arises is: why did Centre restart commercial flights without consulting state governments? Why was there a rush to re-start flight operations without tying up the loose ends? An aviation analyst points out the Union Civil Aviation Ministry was perhaps anticipating bankruptcies in the sector, particularly for some carriers, if the airlines stayed grounded for a few more weeks.

Airlines like SpiceJet and GoAir are literally on a wing and a prayer. SpiceJet, for instance, had negative net worth of Rs 773.4 crore in December 2019. As per Mumbai-based Centrum Broking, SpiceJet is expected to report net loss of Rs 1,178 crore in FY20 which is more than the annual net profits that the airline has ever generated since it was acquired by Ajay Singh in 2015. The no-frills airline was incurring some of the costs - employee expenses and depreciation - even when it was grounded for two months during the lockdown. As a result, it reportedly paid only part salaries for most employees while sending others on furloughs to bring down the fixed costs.

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Domestic carriers are losing Rs 75-90 crore per day, and their debt level is expected to rise to Rs 46,500 crore in FY22, according to rating agency ICRA. Airlines have a long list of creditors (lessors, airports, oil companies) who are waiting to get paid. They also have Rs 3,700 crore of pending refunds to the passengers. Some airlines have stopped paying staff salaries from April.

Ironically, just two days before formally giving a go-ahead signal, Union Civil Aviation Minister Hardeep Singh Puri had tweeted that it's not up to the civil aviation ministry alone to decide on resuming domestic flights. "In the spirit of cooperative federalism, the government of states where these flights will take off and land should be ready to allow civil aviation operations," Puri had tweeted on May 19.

It seems that the minister was aware of a probable resentment from some state governments for these flights. By putting a start date, the minister has perhaps worked backwards in convincing 'opposing states'. His strategy of doing a formal launch (on May 21) paid off because otherwise it would have been challenging for the central government to bring these states on the same page. But why did states agree? In a pandemic like this, no state government can afford to abandon its natives when a majority of other states would not be doing so.

A couple of weeks ago, a chief minister wanted to urgently travel to a state district for some emergency. The request to fly was made at 6am in the morning to the regulator DGCA (Directorate General of Civil Aviation), but the permission didn't come through till 12noon. While the actual reason for the delay never came out, it was rather unsurprising to see that this particular state did oppose to the central government's recent plan to restart domestic air services.

The way in which the government has decided to re-open the skies for scheduled domestic airlines could not have been worse. On May 21, the Puri announced the re-commencement of domestic flight operations in the country by May 25. Although the minister didn't specifically mention the states and the routes that will be re-opened, he said that the airlines would be allowed to fly one-third of their approved summer schedule for 2020 which essentially covered all the states.

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While the decision cheered the travel and tourism sector momentarily, a whole lot of confusion ensued when some states refused to allow air services in their respective states. Others like Assam insisted on quarantine for all passengers coming by air. After several rounds of haggling between the Union Civil Aviation Ministry and the state governments, a settlement was reached. For instance, Andhra Pradesh allowed flights from May 26, and West Bengal from May 28. Maharashtra government, which had initially opposed to any flights, gave permission for 25 arrivals and 25 departures in a day.

By that time, it was already too late. The passengers had already booked the tickets. With the cancellations of flights, especially to Maharashtra, West Bengal and Andhra Pradesh, the stranded passengers who were eager to move to their safe zones are stuck again. Some airlines, like national carrier Air India reportedly didn't even bother to update the status of its cancelled flights on the website leading to passengers reaching the airports, and then returning back. With so much inconvenience caused to the passengers, it almost seems like they are not even a stakeholder in this whole re-start plan.

Even though the flights have now started, and people have begun to travel across the country, there are several imponderables that influence the continuity of the domestic flights operations - whether from the airlines' profitability viewpoint or the (health) safety of such flights. A series of goof-ups and uncertainties have already prompted a large number of people to put off their travel plans for some more weeks. One can only hope that any future decisions on this matter will be taken by keeping passengers in the focus.

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