An IndiGo Airlines A320 aircraft. Photo: AFP

With the Indian civil aviation sector showing signs of recovery, budget carrier IndiGo airlines has announced that it will refund dues to passengers who had booked during the countrywide lockdown period, when flights were suspended to contain the spread of Covid-19 pandemic.

The country’s largest airline by marketshare has said that it has already provided refunds to the tune of 10 billion rupees (US$ 135 million), and cleared 90% of the total credit shells (a credit note that can be used by the passengers for a future booking) the airline owed.

The Directorate General of Civil Aviation, India’s airlines watchdog, had introduced the credit shell scheme in the wake of large-scale refund claims by flyers after flight cancellations. As the airlines were facing financial distress due to the abrupt grounding of flights from March 25 to May 25, they were allowed to open credit shells instead of an immediate refund of ticket fare.

This move was later approved by the Supreme Court in October while hearing a batch of petitions seeking refunds for airline tickets booked during the lockdown. The court had also said that if the credit is not used by passengers, airlines have to refund the ticket money by March 31, 2021, and that the credit scheme will be transferable.

“The sudden onset of Covid-19 and the resulting lockdown, brought our operations to a complete halt by the end of March of this year. As our incoming cash flow dried up, we were unable to immediately process refunds for canceled flights and had to create credit shells for the refunds that were due to our customers. However, with the resumption of operations and a steady increase in demand for air travel, our priority has been to refund the credit shell amounts in an expedited manner. We are pleased to commit that we will disburse the full 100% credit shell payments latest by January 31, 2021. We would like to thank all our customers who stood by us for their patience and understanding during this unprecedented crisis,” IndiGo CEO Ronojoy Dutta said in a statement.

IndiGo is the first airline to announce refunds for all of its credit shells. Other airlines, including the national carrier Air India, continue providing credit shell to passengers. Airlines in India have been incurring huge losses in the past few quarters due to muted demand.

The Indian government resumed domestic flights on May 25 with permission to operate at only 33% capacity on flights, which was later increased to 45%. Airlines are currently being allowed to operate at 60% and this cap will remain until February 24 next year.

Air travel has been showing signs of a gradual revival as strict health protocols have instilled confidence in people. Though air traffic is still only 50% of pre-Covid levels, there has been a steady month-on-month rise in occupancy levels.

However, scheduled international passenger flights continue to remain suspended and the government recently extended the ban until December 31. But India has entered into air bubble arrangements with 22 countries – Afghanistan, Bangladesh, Bahrain, Bhutan, Canada, Ethiopia, France, Germany, Iraq, Japan, Kenya, Maldives, the Netherlands, Nigeria, Oman, Qatar, Rwanda, Tanzania, the UAE, the UK, Ukraine and the US.

According to International Air Transport Association, airlines operating in the Asia-Pacific region, including India, are expected to report combined losses of $31.7 billion in 2020. The industry lobby group expects airlines to improve their performance in the second half of 2021, but passenger traffic may rebound to 2019-levels only by 2024.