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Indian airlines take hit as govt suspends inbound visas to stem coronavirus spread

By Reuters

  • 12 Mar 2020
Indian airlines take hit as govt suspends inbound visas to stem coronavirus spread
Credit: Pixabay

Indian airline share prices tumbled on Thursday after the government moved to restrict travel into the country in an effort to stem the spread of coronavirus, prompting massive ticket discounting in an already slumping air travel market.

Shares in budget airline SpiceJet Ltd skidded nearly 19% on Thursday morning even as it launched a sale offering tickets for as little as $13 one way, along with free meals and seats.

Rival IndiGo saw its shares drop as much as 17%, having warned of a profit hit on Wednesday evening due to a sharp decline in domestic bookings.

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India late on Wednesday said it would suspend the vast majority of visas to the country in a wide-reaching attempt to prevent the spread of coronavirus as cases across the region continued to rise.

“The bigger the airline, the bigger the risk and loss because cancellations will be higher,” said Nripendra Bahadur Singh, industry principal, aerospace, defense and security practice at Frost & Sullivan. With the domestic market already saturated, planes will likely remain on the ground racking up increased fixed costs, he said.

The move to restrict visas comes ahead of the busy summer travel period from April to June, and could also hamper the government’s attempts to sell Air India, the only carrier flying long-haul international routes.

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Though the bulk of revenue for airlines like IndiGo, SpiceJet and premium carrier Vistara still comes from domestic routes, their international exposure had been rising over the last year as they rushed to fill a gap in the market following the collapse of Jet Airways Ltd.

IndiGo has a fleet of over 250 Airbus SE narrowbody aircraft, and international business makes up about 25% of its total capacity and revenues. It has already suspended flights to China and Hong Kong, reduced frequencies to Vietnam and been forced to halt services to Qatar and Kuwait.

It has redeployed part of its international capacity on domestic routes but may still be forced to park a handful of planes as domestic travel demand weakens, said one person with knowledge of the situation. The person declined to be identified because of the sensitivity of the matter. IndiGo’s domestic passenger growth is expected to decline by 6% in the April-June quarter against an industry-wide fall of 5% for the same period, while the airline’s international passenger traffic is expected to dip by 7%, brokerage Centrum estimates.

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