New Delhi: If the imminent Supreme Court ruling on passenger refunds goes against the airlines, it could trigger the need to fund $300 million of domestic refunds, aviation consultancy firm CAPA India said in a report on Friday.
"The value of refunds that airlines will be liable for are estimated at over $500 million, which includes around $300 million for domestic bookings and over $200 million for international travel and other refunds," said CAPA India.
The Supreme Court had on 27 April issued a notice to Ministry of Civil Aviation on pleas seeking full refund against the tickets booked for travel during the COVID-19 lockdown. The plea accused airlines of violating the aviation ministry’s order.
The civil aviation ministry on 16 April issued a memorandum that airlines will have to refund full amount, without imposing cancellation charges, to those who booked tickets during the first phase of lockdown from 25 March to 14 April for travel between 25 March and 3 May.
Analysing the Bureau of Civil Aviation Security (BCAS) for keeping middle seat vacant and last three rows empty to quarantine a passenger showing corona symptoms mid-flight, CAPA India said, "The implication of this is that on a 180-seat narrow body aircraft, an airline can sell at maximum 108 seats, representing a 60% load factor. Even if social distancing is not in place, demand conditions are expected to be so weak that passenger loads are in any case unlikely to be any higher than that. This will naturally increase the average break-even fare."
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According to the report, airlines excluding, IndiGo, will need to raise a minimum of $2.5 billion to survive the grounding due to the lockdown imposed to contain COVIDd-19 pandemic.
"IndiGo is well-placed in terms of cash reserves ($1.13 billion of free cash and $1.33 billion of restricted cash) compared with other Indian carriers. However, it too is not immune to risks in the event of a prolonged crisis," said CAPA India.
Airlines in India are currently grounded and airport operations have been stopped since 25 March due to the government-imposed lockdown to control the spread of COVID-19 pandemic. India currently has a total fleet of 650 planes and due to the nationwide-lockdown almost all of these planes are grounded.
