‘Indigo’s decision to lay off employees just a beginning, one or more airline failures inevitable’

The aviation consulting CAPA India warned that industry conditions are such that one or more airline failures appear inevitable.

Aviation consulting firm CAPA India said that Indigo’s move to lay off 10 per cent of its employees is the beginning of a painful process for Indian aviation as things start to unravel from the impact of coronavirus. CAPA India’s statement came a day after Indigo CEO Ronojoy Dutta announced the airline’s decision to lay off its employees to support the airline’s balance sheet.  CAPA India added that it will be impossible to survive this crisis without a strong balance sheet. The aviation consulting firm also warned in a tweet that industry conditions are such that one or more airline failures appear inevitable. 

Given the unwillingness of the government and third-party investors to invest in the Indian aviation sector, the consulting firm further said that airlines have limited options to turn to for funding except for their promoters. After Prime Minister Narendra Modi called for a nationwide lockdown from the last week of March, the aviation sector was one of the businesses which was hit maximum as all planes were grounded until mid-May. The coronavirus-led travel restrictions came as another blow while the airlines were already suffering from weak balance sheets. However, even as the operations have resumed gradually, the airlines are facing multiple roadblocks in continuing operations.   

Also Read: Indigo to lay off 10% of its employees; says other cost-cutting measures were not enough

Yesterday, Indigo decided to let go 10 per cent of its employees a number of measures such as pay cuts, leave without pay, etc did work out for the airlines to generate enough working capital. Indigo said that the move is unprecedented and painful but in order to sustain the business operations, it is impossible for the company to fly through this economic storm without making some sacrifices.

Also Read: Air India to send many employees on unpaid leave for up to 5 years in major move to cut cost

In another major incident of cost-cutting, many employees of Air India are likely to be sent on leave without pay (LWP) for up to 5 years. The airline has started the process of identifying employees, based on various factors like efficiency, health, suitability, competence, etc. Air India’s board of directors has also reportedly authorised the Chairman and MD Rajiv Bansal to send employees on LWP for a duration of six months or two years, which may be further extended up to five years.