‘Indigo’s 10% staff cut is the start of a painful process’
MUMBAI: A day after Indigo announced that it would lay off 10% of its employees owing to the financial crisis caused by the Covid-19 pandemic, the Centre of Asia Pacific Aviation (CAPA India) – a global aviation consultancy – on Tuesday predicted that the shutting down of one or two Indian airlines would be unavoidable in the near future.
“Industry conditions are such that one or more airline failures appear inevitable. The decision by Indigo to lay off 10% of its staff is the beginning of a painful process for Indian aviation as things start to unravel from the impact of Covid-19 in India. It will be impossible to survive this crisis without a strong balance sheet,” read CAPA’S tweet.
Though CAPA-INDIA did not elaborate if the financial brunt will be borne by large or smaller airlines, its chief executive officer Kapil Kaul said, “With Indigo deciding to further boost liquidity and strengthen its finances by raising funds, and at a later stage also monetising aircraft and engine assets, it is preparing to deal with this crisis. The government may further restructure loans, but it is unlikely that it will provide financial assistance directly or indirectly. So industry consolidation is inevitable and the emergence of Covid-19 has expedited the process.”
Airlines are struggling since March, after the Covid-19 lockdown was announced. Even after domestic operations partially resumed from May 25, most aircraft are on the ground, as airlines are operating with only 60% of their capacity, owing to the poor load factor. “Even as the state allowed 50 take-offs and 50 arrivals from Mumbai, not all airlines are operating their planned flights, as demand is low,” said a senior official of an airline.
According to Jitender Bhargava, former executive director of Air India, airlines that fail to take drastic steps now will fail to survive in the long run. “When there are very few people flying, airlines have to consider cost cutting measures such as downsizing their aircraft, giving pay cuts and laying off staff, as there is no other way for them to sustain,” he said.