After a turbulent 2020, recovery path for aviation firms won’t be easy in 2021
While the pandemic hit businesses hard, the aviation sector was amongst the worst hit in 2020 globally. In India, air travel was restricted when the covid-19 lockdown was imposed in March. This was followed by a gradual easing of operations from May-end.
As we enter the new year, it goes without saying that how demand pans out would be crucial. Here, there has been a reasonable improvement in domestic passenger traffic from the nadir, although it’s uncertain whether the momentum sustains. Varun Ginodia, analyst at Ambit Capital Pvt. Ltd, said, “While the recovery in domestic traffic has been encouraging, it’s worth noting that average daily passenger run-rate has started to moderate this month. Going ahead, it is possible that the recovery may turn more topsy-turvy as seen in Europe/ US” He added, “As such, the recovery in domestic passenger traffic to pre-covid levels (FY20) could be prolonged.” Plus, corporate travel is not expected to return in a hurry with work from home becoming a more prevalent trend. Having said this, a decline in the number of covid-19 cases and positive news flow around vaccine availability may boost passenger confidence and in turn, help demand.
But as the economic situation improves, there is a risk that crude oil prices may also start to inch up and that’s not desirable. After touching a low of $19.33 a barrel in April, Brent crude prices are now trading at $51.29 a barrel.
