“Desperate to resume operations, all Indian carriers are ill-equipped to deal with the extension of the lockdown till May 3.”
“No Indian carrier is even in a position to refund passengers who had booked flights scheduled to operate had the lockdown ended, as originally planned, on Tuesday, April 14.”
“India’s biggest airline IndiGo to cut 10% of staff. In March, IndiGo said it would cut up to 40 billion rupees ($533m; £420m) in costs.”
“In March, a global aviation industry body warned that the slump in travel caused by the coronavirus will drive airline losses of more than $84bn (£66bn) this year. The International Air Transport Association (IATA), which has 290 member airlines, said revenues would drop to $419bn, down 50% compared to last year.”
With headlines like these looming from every corner of newspapers and digital publications, it was difficult to see through the counted months of travel ban and aggressively low to downright negative cash flows and revenue.
Indigo is India’s largest airline with 48.9% market share with reputation of being profitable since 10 years in a row. In such cases, it would be safe to presume that they would be equipped with an emergency plan. But upon deeper inspection, we hear the Centre for Asia Pacific Aviation (CAPA) which closely monitors civil aviation in the country state that, “Most Indian airlines have not structured their business models to be able to withstand even regular shocks, such as elevated fuel prices or economic downturns, let alone once-in-a-century events.”
Countries whose economies depend greatly on civil aviation, such as Singapore and the United Arab Emirates, have provided direct cash infusion to save key airlines.
Airlines in India have, in the best of times, suffered the “double-whammy of steeply rising fuel costs and the decline in the value of the Indian Rupee”, says the International Air Transport Association (IATA). Fuel costs in India, which account for 40 per cent of the overall costs of low-cost carriers, are “well above the global average of 24%.”
InterGlobe Aviation Ltd was in the race to raise funds, but the company has now said that the probability of raising funds through a qualified institutional placement (QIP) are now 50%. But another key reason IndiGo may defer or cancel the QIP is that it already has sufficient cash in hand—free cash of ₹7,527 crore and restricted cash of ₹10,922 crore at end-June. It has announced plans to cut costs and improve liquidity.
What’s more, IndiGo has gained market share during the pandemic. Based on the Directorate General of Civil Aviation data, IndiGo’s domestic market share in July stood at 60.4%. IndiGo’s scale and better financial health helps at a time when smaller airlines are struggling. High liquidity implies IndiGo has fixed cost cover for a year versus 2-5 months for peers. Inducting more cost-efficient fleet and focusing on long-term relationships with lessors/employees imply cost advantage over peers, which was visible in FY20, would only widen.
While the right strategy during difficult times like these serve as one part of the solution, the other half is dominated by the right implementation. And for that, you need the tenacity and dedication of the workforce.
Here are some excerpts from Raj Raghavan, Senior VP, HR during a recent interview –
Given our consistent focus on cost efficiency ever since IndiGo was born, we are trying our best to sustain the business during these unprecedented times.
Across all levels, it’s certainly difficult to manage what’s going on in the minds of our people and how to balance that so they may not succumb to any kind of negativity. We are ensuring that top-level management is also consistently connected with employees through clear, consistent, and regular communication, keeping the underlying thought as ‘we all are together in this’.
Across many industries, the fragility of depending on one job for financial sustenance has become strikingly and painfully obvious across for most employees. Combine that with the absence of any meaningful social safety net and relatively meager savings amongst most segments of our working class–it gets scary.
My personal sense is that young employees will no longer be willing to put all their ‘eggs’ in any one basket / company/ career. I expect employees to have at least one more ‘revenue generation’ path – be it a small business or gigs.
