Indian airlines may post $4.1 billion consolidated damage this fiscal: CAPA

June 05, 2021 Travel
Indian airlines are anticipated to create a consolidated lack of USD 4.1 billion this fiscal, similar from what they are estimated to own incurred in 2020-21, bringing the total losses of 2 yrs to around USD 8 billion as a result of the pandemic so far, aviation consultancy and study firm CAPA explained on Thursday, June 03.

Airlines are estimated to need nearer to $5 billion of recapitalisation found in 2021-22 just to survive, including requirements made through the span of 2020-21, it said.

In a written report, CAPA expects domestic passenger traffic to be around 80-95 million in 2021-22 as against 52.5 million in the last financial year.

However, not surprisingly growth, it'll be well below than around 140 million passenger volumes recorded in 2019-20, CAPA said in the report.

This projection of the traffic volume will not take into account the anticipated third wave of the pandemic, it added.

"We expect that Indian airlines will eventually lose a consolidated USD 4.1-billion in FY2022, similar to that in FY2021. This will take total losses over two years to around USD 8 billion because of this of both COVID-19 waves," CAPA said in the survey.

It added that the full-service carriers are expected to contribute around USD 2.1 billion in the full total losses this fiscal, as the price range carriers would take into account the rest of the USD 2-billion.

The projected losses could rise further if necessary recapitalisation will come in the sort of debt, that borrowing costs should be included, the record said adding that at this time, it is not noted how recapitalisation will be funded.

Full-service carrier Oxygen India and no-frills player IndiGo combined will represent around USD 4.5 billion of the combined around USD 8 billion of losses, according to CAPA.

Airlines are actually estimated to need nearer to USD 5 billion of recapitalisation found in 2021-22 just to survive, including requirements generated through the course of 2020-21, it said.

Out of this, it's estimated that around USD 1.1-billion is in the pipeline in the type of initial open public offerings (IPOs), qualified institutional placements (QIPs) and other instruments. This will not include additional financing necessary to achieve solvency.

In mild of the noted recapitalisation plans of Indian carriers, the incremental requirement could be lowered to USD 3.5 billion. However, it isn't currently practical to determine if the USD 1.5 billion of the planned recapitalisation will materialise, CAPA stated.

Considering its passenger site visitors forecast selection of 80-95 million and uncertainty that exists on the market, it said the guidance based on currently available info is for visitors towards the bottom-end of the number in around 80 million.

"After a massive slump found in April and May, we be prepared to visit a moderate recovery in June as being activity returns, with an acceleration in traffic from the next quarter.

"As was the circumstance in the next half of FY2021, we expect to see rising self-confidence and continued traffic recovery in the second half of this financial year," according to the FY2022 CAPA Outlook.

The international traffic is projected to be in the number of 16-21 million passengers, and again, based on current settings, chances are to be constrained towards the lower end of the number as a result of border restrictions, market access and other strategic risks, it said.

However, international visitors will be particularly sensitive to discrete decisions taken by simply governments on such things, which cannot be predicted, it observed adding that much like domestic traffic, the next half of the year is likely to be a lot more positive.

CAPA said the sector is likely heading right into a higher-cost environment at the same time when it could least afford to with a good possible higher crude prices and currency depreciation.

Airport charges are actually also expected to be a potential challenge, it added.

Recently, airport terminal operators invested a capital expenditure (capex) of around USD 4 billion in infrastructure expansion, in anticipation of traffic that will not materialise for several years to come.

Unless the Airports Economic Regulatory Authority (AERA) Act is amended to lengthen the tariff control period from 5 years to 8 years, a higher airport charges regime is inevitable, it stated.

The industry is likely to induct around 70 aircraft in 2021-22. However, a lot more than 80 aircraft are likely to be retired producing a minor net contraction of the fleet size. On the other hand, as more aged aircraft exit, the results is a younger and extra fuel-efficient fleet, as per CAPA outlook.

It anticipated a strategic consolidation in the domestic airlines space, after the COVID-19 restrictions are lifted.