Covid- 19 has created havoc all across the world with loss of lives and derailing the world economy. India is not immune to this pandemic and Covid has completely dented the economy. Moody estimates India’s GDP to grow at 9.4 percent from their initial estimate of 13.7 percent for the year 2021-22. From health infrastructure to automobiles to the hospitality industry, everyone has suffered the wrath of Covid-19. With curbs on traveling due to lockdown, the aviation sector has been affected the most due to the restrictions. With less air traffic, rising inflation, and expenditure on airports and other associated infrastructural development, the aviation sector is hanging by a thread. This paper will briefly analyse the effect of Coronavirus (Covid-19) on the aviation sector.
Indian Aviation Industry is one of the fastest- growing industries in the world and has the 3rd largest aviation market domestically in the world. Globally, predicting that India’s aviation Industry will overtake the United Kingdom to become the 3rd largest aviation market by 2024. High economic growth and an increase in low-for-cost carriers cater to India’s middle-class population since the last decade, which depicts a massive opportunity for India’s aviation market. An increase in air traffic has led the Govt. of India to increase and improve the airports’ infrastructure and its facilities and services. As of year 2020, India has 153 operational airports, and by 2040, it is estimated by the Civil Aviation Ministry that India would have 190-200 operational airports.
The outbreak of COVID-19 ceased flight operations worldwide, dropping the number of passengers to just over 1.7 billion resulting in a loss of 61% of the passenger traffic. Civil Aviation Ministry ceased international flights with effect from 23rd March 2020 and domestic flights from 25th March, 2020, subject to certain exceptions such as cargo flights and medical evacuation flights.
India’s domestic and international passenger traffic reduced at a CAGR of -9.02% and -28.64%, respectively, from the fiscal year 2015-2016 to 2020-21, due to COVID-19-related restrictions on flights in 2020-2021. In 2020-21, airports in India registered a reduction of 61.7% from 2019-20. Between 2015-16 and 2020-21, freight traffic declined at a CAGR of -1.77%. 
The Coronavirus (Covid-19) crisis has posed a grave survival issue before the aviation sector in the world during the past year. As per an estimate by the International Civil Aviation Organization (ICAO), gross passenger operating revenue loss stands at 370 billion Dollars during the past year. According to International Air Transport Association (IATA), There was a significant drop of about 60 per cent in total number of passengers globally. Further, the aviation sector is the airline industry is anticipated to lose 118.5 billion dollars.
According to CRISIL, passenger traffic at airports dropped significantly at a rate of 65 to 70% in fiscal year of 2021 with around 110 to 120 million, parallelly to fiscal 2009 to 2010 levels, due to COVID-related restrictions. However, passenger traffic in 2022 fiscal year is estimated to project recovery between 260 to 280 million. Recovery will be led by increase in air travelling post Covid- 19 and therefore, in near future travel at airports in India in fiscal year 2025 will be between 450 to 480 million. 
Impact on Airports
Airports have also been equally hit by COVID 19, which has caused a loss of revenue to the Indian civil aviation sector. The Airports Authority of India (AAI) had reported a fall of 92 percent in its revenue from Rs 2,973 crore during the months of April-June 2019 to Rs. 239 crores during the following period in 2020.
Restricted movement of people, night curfews, and different lockdown norms have contributed to passengers’ decline in air travel. Due to COVID,19, the financial cycle of the aviation sector had been affected. Both aviation and tourism sectors are gravely hit due to which, Airports are generating less revenue as they are reliant on flight operations. The reduction in number of passengers across AAI airports saw a major fall from 14.5 million in January 2020 to 27,687 in April 2020. After the removal of cubs and restrictions post first phase of COVID,19 and public mobility resumed picking up with 2.97 million footfalls in August 2020. But it was again gravely affected by the second wave.
AAI has incurred losses for the first time since its inception due to decrease in air traffic at various airports. There was a 65 per cent decline in its revenue in fiscal year of 2021 which fell from Rs. 12,837 crores to Rs. 4,482 crores leading to a loss of Rs.2,814 crores as compared to a profit of Rs. 1,985 crores.
Over 95% of all revenue are generated from aeronautical and non-aeronautical services by the airports. As air traffic declines, airport’s ability to collect charges decreases proportionally. This crisis poses a great challenge at the airport’s financial viability with little flexibility in operating expenditure coupled with capital costs that are fixed. Principal users- airlines, passengers, commercial business presents a grave challenge for regulators in providing revenues to airports on current business models without imposing any additional financial burden on them. Airport’s must must make difficult decisions in some cases in fairly and equitably reallocating airport assets like real estate infrastructure and slots.
During this challenging period of COVID-19, better use of technology will help in improving operating efficiency and also in monetise assets. Touchless Check-ins, RFID bag tags, contactless and paperless immigration and boarding passes etc. can largely obviate the necessity for large passenger squares and check in areas and need fewer commercial spaces which will enhance asset productivity and effectiveness in managing life-cycle costs. A proper balance between resilience and efficiency has to struck.
Capacity has been either been built upfront or being created with significant costs in some airports. The long-term growth remains strong in air markets like India but next 3 to 4 years will pose grave challenges for airport owners and investors to monetise assets or repurpose them to make shareholder value. Competition from newer asset – lighter airports may pose an extra challenge on asset rebalancing and profitability. In some cases, competition from newer asset-light airports may pose an extra challenge on asset rebalancing and profitability. 
In this context, ACI World forecasted that the airport industry was expected to make around 188 million dollars in 2020 before the coronavirus outbreak. The effect of the Covid-19 on airport revenues reduced to 125 billion dollars from airport revenues in 2020. Compared to the projected revenue forecast in pre- covid period., there is a drop of 66.3 per cent  Because of the effect of the COVID-19 crisis on revenues, it has been estimated that the airport industry will face a collective loss of over 94 billion dollars globally by the end of 2021. The airport revenue expectations are cut half (-50.0%) compared to the projected baseline (-48.1% compared to 2019 level).
As per the rating agency, Moody estimates that the recovery of Indian airports, especially those undergoing debt-funded expansion plans, are pushed back because of the consequent second wave of covid-19 and subsequent lockdowns. Even Though air traffic is anticipated to surge domestically and internationally between October 2021 and March 2022, Moody’s have said that disruption caused by the second wave of Covid-19 would likely cause low air traffic and revenue in fiscal year of 2022 and potentially in 2023 fiscal year as well relative to the earlier forecasts.
Rating agencies have lowered the rating of Delhi International Airport to a B1 rating, Fitch Ratings lowered it to BB  This denotes speculative and high risk, which states that the airports will need additional debt to for finishing their expansion plans thanks to decreasing operating revenue flow. Moody’s predict that increase in India’s Vaccination rates would be a key driver for the recovery of airports
GMR Infrastructure Limited, which operates the Delhi and the Hyderabad airport, reports that for the quarter which ended in December 31 2020, the total/consolidated loss widened to Rs. 1120.51 crores. 
Crisil Ratings quoted that the second wave will hinder the revival process and momentum of international traffic. Given this backdrop, it is expected that air traffic volume this in the present fiscal year will be around 60 per cent of fiscal year 2020 level. And recovery to pre pandemic level will only happen by the fourth quarter of 2023 fiscal year. 
Impact on Airlines
With all the distressing circumstances, it is good to see that Indian airlines have survival instinct with no Indian airline being grounded. The story of persistence in surviving by the aviation sector in India is unique and remarkable. Introduction of innovative/new strategies by the Govt has helped in great deal to preserve this sector to a significant extent. Airlines were encouraged to utilise their fleet for the movement of Cargo during the lockdown period. For the movement of freighters, international borders remained open. Evacuation flights and transport of essential goods and medicine have generated revenue and kept the aircraft airworthy. COVID 19 has also seen the emergence of regional airlines enhancing aerial connectivity. Progressive markets like India have already created the capacity to fulfil consistently collective demand for airways in the last two decades.
Not only all negative but few positive effects of pandemic disruption are noticed in the aviation industry. The aviation sector comprising of airports and airline companies have adopted novel solutions that should help brace themselves from the distressing impacts. For example, almost 90 percent of web check-in is achieved from a mere 10 percent, pre-Covid level.  Touch- free baggage drop, least contact security checks, continuous and uninterrupted movement of passengers through Digi- Yatra shall help improve operational efficiency in the sector. COVID 19 has also seen the emergence of regional airlines enhancing aerial connectivity. With the introduction of new routes under the Regional Connectivity Scheme, the Govt has opened new opportunities to sustain the airlines. In March 2021, the Ministry has proposed 392 routes under the UDAN 4.1 bidding process. SpiceJet had initiated seaplane services but has suspended the services until September 2021.
Despite all the issues, the Government is striving to develop aviation infrastructure even amidst the COVID period. Upbeat private investments, high demands related to airports, opening regional airports, big domestic markets are drivers for a robust outlook. The domestic passenger demands are anticipated to reach pre- covid levels with all the recovery prospects during 2 to 3 years in fiscal years 2023. Whereas international demand recovery is expected to be relatively slower, taking 3 to 4 years and likely to reach its pre- covid levels by fiscal year 2024. 
CAPA Centre for Aviation, in its report ‘Key Trends in Indian Aviation in FY2022: Impact of Second Wave’, has quoted, “Most Indian airlines were already very vulnerable prior to COVID, with weak balance sheets and poor liquidity. COVID inflicted massive losses and an increasing debt burden on carriers that were structurally ill-equipped to absorb this impact.“
The aftermath of COVID 19 on the aviation sector can foresee airlines into bankruptcy due to their failure to pay lease rentals interlinked with air traffic. With practically no financial aid to the aviation sector, survival may seem tough for the industry. The demand for air travel may decrease due to various restrictions, and there may be a massive structural change in demand. Moody’s analysis suggests that airports in the expansion process might be pushed back through debt funding due to the 2nd wave and different lockdown norms.
Various reports and analyses by CAPA strongly suggest that the only Indian airline to smooth survival will be Indigo during the COVID 19 times. However, times look tough for SpiceJet even though in a recent case (Wilmington Trust SP Services (Dublin) Ltd v SpiceJet Ltd  EWHC 1117 (Comm)), the English Court granted relief to SpiceJet on account of default payment of lease rent even though the Lease had a hell or high water clause which obligated SpiceJet to pay the rent and the payment shall be absolute and unconditional and shall not be affected or reduced by any circumstances will not be affected or reduced by any circumstances”.  The Court further stayed the execution of judgment and directed the parties to settle the matter amicably.
In accordance with the research done by Morgan Stanley, it is estimated that the Indian aviation sector will bounce back towards the year-end and it is anticipated to rule the skies in the Fiscal Year 2022. However, the big question that remains unanswered is what happens if the third wave hits the aviation sector and how difficult will it be to travel by again. Also, DGCA reports suggest that air travel in June was 47% higher than in May, giving the industry a silver lining.
IndiGo will be the only Indian carrier with a smooth survival due to its strong balance sheet. In contrast, Vistara has seen an increase in leisure travel post the vaccination drive. With the rebirth of Jet Airways, the aviation sector sees new hopes amidst the COVID 19.
About the Authors
Ankita A. Xalxo is an Associate at RNC Legal.
Kshitij Pandey is a 3rd Year Law Student at Dr. Ram Manohar Lohiya National Law University, Lucknow and is an Associate Editor (Designate) at IJPIEL.
Views expressed are personal and do not reflect those of the institution with which the authors may be associated.
Managing Editor: Naman Anand
Editors-in-Chief: Akanksha Goel and Aakaansha Arya
Senior Editor: Jhalak Srivastav
Associate Editor: Kshitij Pandey
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Preferred Method of Citation
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 Clause 4(c) of the Lease Agreement.