Indian airlines have been asked to issue a full refund for tickets booked for travel during the country’s recently extended lockdown period, and this could impact their cash position.
In a memorandum published on its official Twitter account, the Directorate General of Civil Aviation (DGCA) said on 16 April that tickets booked and paid for during the initial lockdown period of 25 March to 14 April, and for travel during that same period, must be fully refunded without cancellation charges. The same applies to tickets booked during the first lockdown period for travel during the extended lockdown period of 15 April to 3 May.
The measures apply to both domestic and international flights and the airlines must complete refunds within three weeks of passengers requesting them.
Twitter and other social media have been ablaze with angry comments from Indian airline customers demanding refunds, with airlines’ social media managers rushing to respond to aggrieved passengers.
“Grievances were received from air travellers regarding refund for flights cancelled because of the nationwide lockdown to combat Covid-19,” says the country’s civil aviation minister Hardeep Singh Puri when announcing the refund measures.
Before DGCA’s announcement, most airlines declined to provide refunds and instead offered to store the transaction value as a credit that could be used at a future date.
IndiGo, the country’s largest low-cost carrier by fleet size, says on Twitter it is “reviewing the directives given by DGCA on refund during the lockdown”. Cirium understands that the airline intends to comply with the DCGA memorandum.
The measure means cash outlay for the country’s carriers and subject to a three-week deadline, is one more setback as they, like many airlines globally, struggle to stay afloat amid the coronavirus outbreak.
IndiGo ended 2019 with a total cash balance of Rs201 billion ($2.6 billion), comprising Rs94 billion of unrestricted cash and Rs107 billion of restricted cash.
SpiceJet, the country’s other publicly traded carrier, had cash and cash equivalents of Rs863 million as at 30 September 2019.
Flag carrier Air India, which has faced financial issues for some time and is undergoing a sale process, had Rs2.5 billion in cash and cash equivalents as at 31 March 2019.
Privately held low-cost carrier GoAir’s latest cash position does not appear to be publicly available, though it is backed by the Wadia Group, one of India’s oldest conglomerates.
AirAsia India, which is owned by Tata Group, saw a net decrease in cash and cash equivalents of Rs1 billion in fiscal year 2019 against a net increase of Rs935 million in fiscal year 2018, according to Indian business newspaper The Financial Express.
The newspaper adds that Vistara, controlled by Tata Group subsidiary Tata Sons, enjoyed a net increase in cash and cash equivalents during fiscal year 2019 of Rs2 billion, though this was down 23.4% year-on-year.
Reuters reports that the airline has negotiated a reduction and deferment of payments to some suppliers to conserve cash, and the airline’s chief executive Leslie Thng said in an email to employees that it was of “paramount importance” to do everything possible to conserve cash.
Meanwhile, SpiceJet’s managing director Ajay Singh argued in an interview with Indian newspaper The Economic Times, published on 16 April, that the coronavirus pandemic provides the perfect opportunity for structural reforms in the sector.
“People say that India only reforms in a crisis and if that is true, we should certainly use this crisis to bring about the reforms that we have sought for so long,” he was quoted as saying.
Singh added that the aviation industry has been the hardest hit industry during the pandemic. “[B]ut in all of this there is an opportunity for the aviation sector to re-look at the way we do our business.”