Aviation loss to widen to ₹21,000 cr. in FY21: ICRA

‘Sector needs up to ₹37,000 cr. more’

The Indian aviation industry is estimated to report a significant net loss of ₹21,000 crore in FY21, against a net loss of ₹12,700 crore in FY20, with the industry debt level increasing to ₹50,000 crore (excluding lease liabilities) over FY21-22, ICRA said in a report.

The rating agency said the industry would require additional funding of ₹35,000-₹37,000 crore over FY21-23.

“The two listed airlines [IndiGo and SpiceJet] have together lost ₹31 crore per day during H1 FY21. As the airlines gradually recommenced domestic operations, along with continued chartered and cargo operations, thereby resulting in significantly higher yields, their daily cash burn started reducing,” Kinjal Shah, VP, ICRA Ltd., said. “This resulted in a lower daily loss of ₹26 crore for the two listed airlines in Q2 FY2021, against ₹37 crore in Q1 FY2021,” she said.

“With a sequential improvement in domestic passenger traffic, and continued cost rationalisation initiatives by the airlines, further supported by the benign aviation turbine fuel (ATF) prices, the daily cash burn for airlines has further reduced in Q3 FY2021,” Ms. Shah said.

The rating agency said the recovery in domestic passenger traffic depends on containment of the spread of COVID-19, willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, travel restrictions, quarantine norms, and recovery in business travel.

“The ongoing increase in the number of infections, and expectations of non-availability of a vaccine on a wide scale until H2 CY2021, will in turn continue to impact consumer willingness to travel and even business travel as businesses and corporates continue their work-from-home policy,” ICRA said.

“ICRA thus expects FY2021 to witness a higher decline of 62-64% in domestic passenger traffic, than its earlier estimates of 41-46% decline. With this, the domestic passenger traffic will reach much lower than the FY2011 levels. The recovery in air travel is expected to be gradual once the COVID-19 threat is allayed,” Ms. Shah added.

The impact of the pandemic will be more profound and last longer on international travel compared to domestic travel.

“ICRA expects the FY2021 international passenger traffic for Indian carriers to witness a significant YoY decline of 88-89%, higher than its earlier estimates of 67-72% decline,” Ms. Shah said.

Due to the low base of FY21, the passenger growth in FY22 for both domestic and international operations will be robust; however, it will still be significantly lower than even FY16 levels.

In the near term, the balance sheets of Indian carriers will remain stressed until the carriers are able to reduce their debt burden, it said.

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