The Government’s decision to allow scheduled commercial international flights to resume operations from later this month will come as a big relief to the travel, tourism and hospitality sectors, which have been among the hardest hit by the pandemic. The International Air Transport Association estimates that the global aviation industry suffered about $201 billion in losses between 2020 and 2022 due to COVID-19 and the accompanying curbs on overseas travel and domestic mobility. The tourism and hospitality industry largely feeds off the aviation sector for its earnings and jobs growth, evident from estimates that in 2020 — the year of lockdowns — India’s foreign exchange earnings from tourist arrivals from abroad plummeted 76% from the previous year, to ₹50,136 crore. Official data show that in just the nine months ended December 2020, 21.5 million jobs were lost in tourism. However, the decision to open up international travel has coincided with the intensification of sanctions on Russia in the wake of its invasion of Ukraine, which in turn has sent oil prices soaring on fears of disruptions to global energy supply chains. The price of crude oil has zoomed close to historical peaks. As a result, aviation turbine fuel (ATF) prices have also jumped by almost 60% year-on-year. This month, India’s state-owned oil marketing companies raised ATF prices for the fifth time this year, and this was before crude soared to near record highs. Fuel costs typically constitute about one fifth of a global airline’s operating expenditure and multiple price increases are certain to hurt airlines’ margins and viability.
The conflict in Ukraine has also triggered a sharp jump in a wide range of commodity prices, that is potentially set to quicken inflation across the globe. This is bound to seep into the cost of overseas travel as well, with travellers needing to budget more for food and entertainment. Airlines will find it a challenge to fill seats profitably, given the combination of rising costs, economic uncertainty triggered by the conflict in Eastern Europe and the residual fear among travellers of new variants of the SARS-CoV-2 virus. Strict regulations as various parts of the world cautiously open their borders to visitors will only add to the burden of the aviation and the hospitality industries. And, with the pandemic and restricted mobility having steered corporates to conduct business online effectively, getting business-related travel back to pre-pandemic levels will be a tough ask. Restoring visitor confidence through enforcement of COVID-19 protocols and widening vaccination coverage alone may not be enough. Estimates show that indirect taxes take away 21% of airlines’ revenue, hobbling the sector. Lowering ATF prices by cutting duties is an option the Government must weigh. Everything must be done to woo back more tourists.
