Coronavirus impact: Long road to recovery for tourism, airline companies

International air fares have dropped 30-35% since the outbreak.

By Anwesha Ganguly The global outbreak of the novel coronavirus (COVID-19) has dealt a massive blow to the Indian travel and tourism industry, particularly airlines. Since the coronavirus has started spreading, many countries have issued travel advisories on the worst affected geographies, including China, South Korea, Iran and Italy.

Related News Some analysts fear that the overall economic impact may exceed £1 trillion. International air fares have dropped 30-35% since the outbreak.

With little visibility on when the virus will be contained, the estimated revenue loss on passenger business alone could be as high as £113 billion. Global air travel demand growth in January was the slowest monthly increase since April 2010. In India, airlines and tourism sector representatives have rushed to the government seeking financial support.

Average one way fares to routes including Mumbai-Singapore, Bangalore-Dubai and Delhi-Dubai have fallen between 41-46% month-on-month in March, data collated by the travel platform Ixigo showed. India's largest airline, IndiGo's fare for Mumbai-Singapore flights dropped to Rs 9,051 in March, compared with Rs 13,720 in February and Rs 10,303 during March 2019. Meanwhile, IndiGo's Delhi-Dubai fares fell 47.4% year-on-year (y-o-y) to Rs 9,072 in March 2020.

In February, the fare on the same route was Rs 15,125. Air India and Vistara have seen a 26% y-o-y drop in sales (on billing-and-settlement-plan basis) on international routes in February, a senior airline executive told FE. "Selectively just for bookings to South East Asia and West Asia the impact is more severe, over 50%," the source said. West Asian airlines have taken a significant hit.

Dubai-based Emirates also saw a 17.4% y-o-y fall in fares on the Delhi-Dubai route to Rs 10,606 in March. "Around 80% of Emirates' network is on hold... we expect a revenue loss of around £4 billion. Their operating cost would go up by around 18% y-o-y in the following year," said Mark Martin, aviation consultant. Global air travel demand growth (measured in total revenue passenger kilometers) slowed to 2.4% year-on-year (y-o-y) in January 2020, compared with 4.6% y-o-y growth last January, said International Air Transport Association (IATA).

Coronavirus impact: Long road to recovery for tourism, airline companies

Travel and tourism generates 10.4% of the global GDP, and supports 319 million jobs worldwide, according to World Travel & Tourism Council. Industry players still do not have full visibility on the extent of damage the outbreak will cause. "While a sluggish economy, coupled with the COVID-19 scenario, has seen a dampening of travel sentiment, it is early days to assess impact or duration. We continue to closely monitor the situation and are in constant touch with government health authorities, tourism boards and our local partners on the ground" said Rajeev Kale, president and country head, Thomas Cook (India). "Collectively, the impact is roughly being seen at around £1.2 trillion, which goes towards hotels, airport services, tourism, and even retail," Martin said.

Even if the virus is contained, sentiment has been severely impacted by travel advisories issued around the globe, said Jyoti Mayal, president, Travel Agents Association of India (TAAI). "The entire tourism industry structure has come to a standstill. Not only that, there is a lot of apprehension on what the future holds. To return to normalcy, it will take at least a couple of months.

The outbreak will take some time to subdue even if it is contained. It will take some time for people to have the confidence to travel again," Mayal said. Such is the panic that even hotels have refused to check-in to tourists from the worst affected countries, the Indian Association of Tour Operators (IATO) said.

Holiday operators are looking to the government for a bailout in the form of tax relief, loan and overdraft relaxations. "The holiday season for Indians is between April to June is when people travel abroad. Our members have paid huge advances to foreign suppliers and service providers. Not everyone is issuing refunds.

The airlines are also not refunding tickets in totality. The customers are holding the travel agents accountable. It has become a challenge," Mayal told FE.

Meanwhile, bookings to some destinations in the Indian sub-continent remain steady as of now. "Destinations that are witnessing high demand for Summer 2020 include Andaman, Goa, Himachal Pradesh, Kashmir, Kerala and the North Eastern states. This is coupled with other destinations in the Indian subcontinent such as Bhutan, Sri Lanka, Myanmar and Nepal," Kale said. Tourists are also still actively booking their vacations in Maldives, Vietnam and Thailand, said Aloke Bajpai, co-founder and CEO, Ixigo.

IATA has already approached governments seeking financial relief for the aviation sector. "IATA met the Indian government seeking a reduction in air navigation charges and other relief measures. Ultimately the impact of Coronavirus, the resultant loss in traffic and grounding of fleet, it will be very difficult if only airlines have to bear it," the source said. The Indian aviation ministry in reportedly considering providing financial relief to airlines.

Even when the outbreak is under control, road to recovery will be a long one. "If we manage to contain the virus, it will take the aviation industry between 24-36 months to recover their losses. This would mean no more aircraft acquisition from Boeing and Airbus. We are looking at possibly reduction of fleet as well," Martin said.

As the situation develops, some players hope that the outbreak to slow down during the summer months, but when things will take a turn for the better is still anyone's guess. "I do not see any respite in the immediate future," Mayal said.

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