The world’s third largest domestic aviation market came to a grinding halt due to be an unparalleled directive issued by the Ministry of Civil Aviation (“MoCA”), India suspending all domestic flight operations to curtail the spread of COVID-19. Airlines were caught off guard and given little notice to collectively ground over 650 aircraft by 23:59 IST hours on 24th March 2020.

Indian airlines, just like their peers overseas, were already facing a considerable drop in demand on both domestic and international routes prior to the suspension of flights. All Indian airlines barring Air Asia India and regional airlines, deploy significant capacity on international routes. At first, frequencies on international routes, primarily to S.E. Asia, China and the Middle East were reduced and were suspended altogether shortly thereafter. As COVID-19 spread, the Indian government proactively issued travel advisories suspending visas issued to foreign nationals and persons who had undertaken travel to and from countries severely impacted by the virus. Simultaneously, the government directed Indian citizens to avoid all non-essential travel, both domestic and international. Indian airlines had no choice but to comply with the travel restrictions (which resulted in a corresponding drop in demand) by curtailing operations to conserve cash and reduce losses. This resulted in between 25% – 35% of the entire fleet of domestic airlines being grounded, all this, it must be borne in mind, much before the 24^th of March midnight suspension was announced.

The suspension of flights was scheduled originally till the 31^st of March 2020, but was extended further to 23:59 IST hours on 14^th April 2020 as Prime Minister Narendra Modi announced a nationwide lock down for a period of three weeks starting the 24^th of March 2020. As we approach the 14^th of April, airlines are working tirelessly, behind the scenes, to overcome various challenges they are likely to face in restarting operations.

Making flying safe again

With 12,74,923 confirmed cases and 69,479 deaths worldwide (figures correct at the time of publication), the COVID-19 pandemic is wreaking havoc on air travel and is responsible for the grounding of almost 10,500 aircraft (representing over 40% of the global fleet as per IATA), due to an unprecedented drop in demand. Travel, domestic and international is the last thing on anyone’s mind right now. Hence, once the suspension is lifted, convincing the common man and woman that it is safe to fly will be the most significant challenge which the aviation industry will have to overcome.

Airlines and airports must jointly address health concerns raised by COVID-19. Social distancing norms must be implemented throughout a customer’s journey. Thermal screening which has been limited to passengers arriving from international flights must be implemented for domestic operations (arrivals and departure) too. This is easier said than done as every square inch of space at an airport or in an aircraft is prized real estate, which is usually economically utilised by the operator by cramming as many people as possible without significant discomfort. Queue management with minimal human interaction will be key in regaining customer confidence.

Regulators must also play their part ensuring aircraft and airports do not become COVID-19 hotspots. The Directorate General of Civil Aviation (DGCA), India has issued strict guidelines to both airports and airlines to enforce social distancing. From maintaining adequate spacing at check-in counters between passengers (minimum one metre) to leaving the middle seat between two passengers empty, operators must comply with a long list of requirements (precautionary in nature) before operations may be successfully restarted.

There is however immediate need for new security procedures which address sanitisation concerns. Plastic trays used by hundreds of passengers as they drop shoes, laptops, etc. to clear X-ray scanners and hand held electromagnetic wands used by personnel to detect metal under clothing are two that come to mind.

Aircraft cabins will also need to be sanitised more frequently. All of the above would have to prioritised over quick turnarounds, aircraft utilisation and revenue & yield management. At least in the short term.

Communication is key to navigating through any crisis and all of these preventative measures must simultaneously be communicated to the customers by both the airlines and airports. The messaging should be crisp and on point. This campaign is unlike any other marketing blitz in the past as the survival of the entire industry depends upon it.

Keeping Fleets intact and Lessor’s engaged

Airlines in India have (some say dangerously) built their models around sale and lease back transactions. The airlines have followed an asset light strategy where aircraft are leased instead of owned. An asset light model can deliver a better return on assets, lower profit volatility, greater flexibility and higher scale-driven cost savings than asset-heavy models. Leasing also of course, comes with its drawbacks.

As a majority (80%+) of the aircraft operated by Indian airlines are leased, airlines are bound by contract to pay lease rentals and maintenance rent / supplemental rent / maintenance reserves on a monthly basis. The relationship between lessors and airlines is based on mutual trust, nurtured by good communication and guarded by water tight contracts. However, it may be fairly correct to state that when times are difficult, the contracts seem very heavily weighed in favour of the lessors.

Lessors have received requests from a majority of Indian airlines for relief from payment obligations under lease agreements. Some have already (majorly) fallen behind on lease payments. How and if these requests for deferrals are approved, almost entirely depends on the airline’s creditworthiness, forward business plan, previous payment history with the lessor, current financial position and the ability to pay deferred rentals in the future.

There is evidence of some airlines in India facing liquidity concerns and this is bound to have an impact on payments to lessors. Airlines must engage with lessors as most lessors expect the airline to be current on its obligations (in most circumstances, the lessor may in turn be in default of its own financial obligations in case the airline is in default with the lessor) and be regular in making payments to consider a payment deferral.

The present scenario is also a very fine balancing act as interestingly, lessors themselves do not want to take back aircraft and have to deal with an idle asset lying on the ground.

Matching supply for minimal demand

Reports suggest that the Ministry of Civil Aviation (“MoCA”) plans to remove restrictions on air travel in phases ensuring all possible precautions are implemented especially at airports avoiding any cross contamination during air travel.

The Press Trust of India (“PTI”) on the 05^th of April reported the likely resumption of flights, both domestic and international, in a staggered manner post the 21-day lockdown. PTI’s report suggested the information was from a government official in the know. Shortly after, The Minister of Civil Aviation, Hardeep Singh Puri, clarified via Twitter that a decision to restart flights after the lock down period remains to be taken. He also went on to add, if required the Ministry will access the situation on a case by case basis.

Route planners, revenue managers and commercial teams at airlines use various analytical tools which largely rely on historical data to predict demand for flights on routes. These tools coupled with market insights and the current economic outlook help plan a commercially viable schedule for operations.

The world has had its share of Black Swan events in the past e.g. the Gulf War, September 11, the global economic crisis of 2008, etc. Each one of them impacted aviation greatly however none of these events or any other in history can be compared to the current crisis due to COVID-19. The multiple travel advisories and fear of COVID-19 will force airlines to restart operations with a truncated schedule, the formation of which will rely on instinct rather than big data. Historical data is of no use because in this case, lessons learned from history will not guide the future – thereby adding to the uncertainty.

There would in all likelihood be pent up demand from people who are stranded away from home to begin with. However, this would quickly die down giving airlines a true picture of real demand for air travel.

Crew Logistics Management (CLM)

In layman’s terms, CLM means ensuring there is a set of crew to operate every scheduled flight at an airline. This might sound easy but in reality, is a multi-dimensional task involving various stakeholders and active oversight by the Regulator.

Crews are intimated of the months duties via a roster which is published in the last week of each month for the following month. Some airlines also publish weekly / bi-weekly rosters (usually a sign of an airline facing operational challenges). Sickness and operational disruptions are managed by the CLM teams in real time by using crews on standby duties and calling in favours from crews when in desperate need. The CLM teams have to go to great lengths to crew flights.

Due to the uncertainty around resumption of operations, most domestic airlines haven’t published rosters from the 15^th April 2020 onwards. Only upon receiving a go ahead from MoCA for resumption of services, and after finalizing a tentative schedule, will airlines be able to draw up rosters for crews.

No domestic airline has all its aircraft parked at base i.e. home / hub airport. Most airlines have crew bases across India but the number of crew based in a city might not be sufficient to crew all the aircraft grounded there. Crew might need to be positioned from another base to cover the entire flying programme. A phased resumption of flights will greatly help alleviate multiple logistical issues.

Another significant issue which has been duly addressed by the DGCA is that of validity of approvals issued to organizations, both Indian and foreign, under Rules 133B and 133BA of the Aircraft rules 1937. These along with licenses issued to aircraft maintenance engineers have been extended. An extension has also been issued for recurrent trainings and checks lapsed or lapsing in respect to crews, instructors, flight dispatchers, engineers.

These extensions will help ensure business continuity during and immediately after the period of lockdown.

Engineering Challenges

Grounding an entire fleet of aircraft and returning them to service thereafter is a mammoth task which requires due consideration to be given to various processes. The same was detailed in a report last week and can be found on the link below:

https://sarinlaw.com//lockdown-woes-storage-and-return-to-service-of-grounded-aircraft/

Safety of Employees and Morale

Airline employees, especially crews will be taking significant risks when reporting for work. Front line staff at airports including ground staff, baggage handlers, etc. are equally exposed to the possibility of unknowingly contracting COVID-19. Cabin crews in particular are having to go through a 14-day quarantine if there is a confirmed case of COVID-19 on a flight they operated. There are multiple cases of airline employees testing positive. This has left the entire aviation community extremely hesitant about reporting for work in these extra ordinary circumstances (not to mention the social stigma being unfortunately attached to crew).

Some airline employees might not be comfortable operating flights to and from COVID-19 hot spots. Some might not want to fly altogether. These are very valid concerns which airlines must be prepared to deal with. How airlines deal with this will be a test case for the future.

Airline employees must be provided with appropriate personal protective equipment (“PPE”) i.e. gloves when collecting used meal items and waste; practice careful hand hygiene and wear full PPE, including mask, gown and goggles, when dealing with a sick passenger suspected of having COVID-19.

As the virus may survive on some surfaces for several hours or even days, aircraft cleaners and baggage handlers too must practice appropriate hand hygiene. Employees protected with the appropriate gear and armed with relevant information about COVID-19 will help allay any fears passengers may have when onboard.

Equally important is employee morale. Most airlines in India have announced pay cuts due to the uncertainly caused by the COVID-19 pandemic. Despite pay cuts, some have deferred part of salaries for staff. This is a clear indication of liquidity issues at these airlines. These payroll issues and the doom & gloom surrounding aviation is bound to have an impact on employee morale. Airlines must put their people first during these testing times and ensure they have the help and support to deal through this crisis.

Conclusion

Every campaign the world over to prevent the spread of COVID-19 unanimously appeals to people to stay home.

Staying home and maintaining social distancing is what will get us through this pandemic. Unfortunately, staying home may sound the death knell for air travel, at least in the short term.

Airlines will undoubtedly be able to restart operations once the suspension of flights is reversed. However, it will be a long time before we see any of them flying at pre-COVID-19 capacity levels.