Grounded by Covid-19 (Indian Express)

Mains Paper 3:Economy 
Prelims level: Low-cost carrier model 
Mains level: Low-cost carrier model implementation in aviation sector 

Context:

• As airlines grapple with the corona crisis and push for a bailout, airline planning departments are already running models to analyse how planes can be profitably put back in the air. 

Key outcomes:

• For low-cost airlines that now fly eight out of every ten passengers and rely on volumes, quick turnarounds on the ground, leased assets, high aircraft utilisation, crew-efficiency and ancillary revenue, the model is at odds with anticipated policy changes.
• These are likely to force airline planners and strategists to rethink the low-cost carrier (LCC) model.  
• Much uncertainty remains, but items can be planned. Key amongst these are sanitation, security procedures and social distancing. 

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Rely on LCC model: 

• The current LCC model relies on short-ground times referred to as quick turnarounds. 
• This helps airlines maximise the use of their most expensive and core asset: the aircraft. At $50 million per unit, it is imperative to drive as much productive utilisation as possible. 

Key challenges behind implementation process: 

• This is achieved by ensuring a high flight time, enabled by keeping the plane for less time on the ground. 
• Quick turnarounds also maximise labour efficiency and amortise costs driving down unit economics.
• While measures are still being debated it can be assumed that wait times will increase, and the requirement to get to the airport early will be enhanced. 
• As such, the convenience of low-cost travel is likely to see an impact. 
• Further, security costs are paid for by the passenger by levies such as the passenger security fees, and the passenger facilitation charge. These are likely to go up and, in turn, will further impact the cost of travel.
• For low-cost carriers that rely on low-fares and make money by transporting large volumes, the security measures and their impact will be detrimental to the low-cost demand. And, mitigation measures are few and far between.
• Finally, the government has already come up with guidelines for airlines that will be allowed to fly as the lockdown restrictions are lifted. 

Conclusion: 

• Social distancing will also impact the ability to buy food and products onboard. While for passengers, this may be quite bearable, for airlines, this will be another large hit to revenues.
• Air travel demand is likely to be depressed. Gradually as confidence builds (or declines) depending on reports and reactions, incremental measures will be accepted. 
• LCC model will not only require tweaking, but a transformation to enable profitability.

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General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1)With reference to the Central Electro Chemical Research Institute, consider the following statements:
1. It is a national laboratory under the aegis of the DRDO. 
2. It was established in 1853 as a premier institution for research and development in electrochemical science and technology in India. 

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer.......................

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Mains Questions:
Q.1)What are major outcomes if the government will implement the low-cost carrier model? What are the key challenges lagging behind the implementation process?