Indian aviation sector had its own issues before the onset of Covid-19. Covid-19 just made things worse for them, thanks to the lockdowns and ban on air travel. The aviation sector started showing signs of recovery after the first wave of Covid-19. Then the Delta came, bringing another set of restrictions along with it. Two big blows in two years, the Indian airline industry was gasping for breath. Thankfully, the industry received a much-needed impetus with the easing of restrictions put out in place by the states. The demand picked up from June 2021 and all was going well. Then the Omicron happened. What is the effect of Omicron on the Indian aviation industry? Read on.
Source: ICICI Securities
As seen from the above graph, the numbers for average daily passengers remained flat during December 2021 at 358,00,000 compared to 350,00,000 average daily passengers during November 2021. Christmas and New Year are generally considered to be a season of travelers. However, the fears of Omicron took over the sentiments of the travel explorers. This has slightly dampened the spirit of the aviation business. These numbers are still 15%-20% down compared to the pre-pandemic average daily passenger levels. However, there has been steady growth since June 2021. The average daily air passengers for instance increased as much as 20% from October 2021 to December 2021.
Will Omicron Slowdown the Aviation Industry?
The Indian government deferred the scheduled resumption of international flights from December 15th. Two weeks on, the fears of omicron are not as much as they were projected initially during the last week of November 2021. However, we still need to figure out a way to avert possible third wave. If not avert, at least to be able to deal with it. With the number of positive cases picking up in India, there’s still uncertainty as to whether this will lead to third-wave or fizzle out earlier than predicted. Until then, the Covid-19 will keep haunting the aviation sector.
Sectors Affected/Investment Opportunities:
When the air travel industry remains in the doldrums, the Hospitality and travel luggage sectors will be affected as well. Since the recovery from the Covid-19 pandemic is a walk on a long rope, the businesses in the above sectors are yet to hit their pre-covid numbers. The road to recovery has been slow but steady. However, roadblocks in the form of Delta, Delta Plus & now Omicron occurred. A lot of investors are bearish on these sectors and feel these are undervalued. One would have to be cautious as the Omicron fears have not yet faded away from the world.