HomeBUSINESSIndian Aviation industry to face a huge loss in FYI 2021

Indian Aviation industry to face a huge loss in FYI 2021

A Credit rating agency Icra said that Indian airlines will post net losses of about Rs 21,000 crore during the upcoming fiscal year 2021, that is because of the travel restrictions and impact on the passengers travelling due to the coronavirus pandemic.

Icra then said that the Aviation industry i.e airlines would need to have some additional fundings to the tune of Rs 37,000 crore over the FY2021 to FY2023 to help  recover itself from losses and debt it will be facing, adding that the agency maintains a “negative credit outlook” on the Indian airline industry.

The report read that the Indian aviation industry’s capacity and passenger growth have been significantly impacted since the Covid-19 pandemic situation had statrted, due to which the Ministry of Civil Aviation restricted international travel operations with the post effect from March 23, 2020 and domestic travel operations from March 25, 2020.

Post the initial recommencement, the operation of the scheduled domestic flights started from May 25, 2020 to a limited extent i.e. a maximum 1/3rd of their respective approved capacity, the MoCA permitted raising the capacity to 45% with from June 27, 2020 and further to increase to an extent up to 60% with from September 02, 2020.

Indian Aviation industry to face a huge loss in FYI 2021
Indian Aviation industry to face a huge loss in FYI 2021

 However, the recovery in domestic passenger traffic has been rather been brought into subjection, even though there is substantial improvement. Since November 11, 2020, the MoCA has increased the permitted capacity to 70%,and then further to 80% with effect from December 03,2020. Even after all this steps the profitability of the Indian airlines remains adversely impacted during FY2021 due to the lower revenues and high fixed rates even though passenger traffic continues to improve.

During FY2020, it has been reported by Indian airlines- a net losses of Rs 12,700 crore.The overall airline industry debt in the upcoming year is expected to increase to about Rs 50,000 crore, excluding lease liabilities by FY 2022, as said by Icra in his report.

The two listed airlines [including IndiGo and SpiceJet Limited] have together faced a loss of about Rs 31 crore per day during FY2020 [April-September 2020],the report further read, adding that daily loss for airlines has been reduced to Rs 26 crore during the month of September  improvement in domestic passenger traffics.

The report added that the recovery of domestic passenger traffic will be all dependent on several factors, which include the amount and level of covid-19 infections and spread, the development and availability of vaccines for all, willingness by people to undertake travel and flights, and recovery in macroeconomic growth.

Increase in the number of infections, and the non-availability of a vaccine on a wide scale until the second half of the year 2021 are expected to impact the air travel.

ICRA thus expects FY2021 to witness a higher decline of nearby 62-64% in domestic passenger traffic, than it earlier estimates which was about 41-46% decline. With this, the domestic passenger traffic will reach much lower than the FY2011 levels, it said. The recovery of the air travel will be gradual once the Covid-19 threat diminishes.

However, the international air travel is heavily dependent on opening up of international operations by the government of India as well as lowering of quarantine norms and restrictions by various countries, the impact of the coronavirus pandemic on international air travel is expected to more and to last long as compared to domestic Indian flights.

Thus, Icra expects a significant year-on-year decline of about 88-89% for the FY2021 international passenger traffic for Indian carriers, higher than its earlier estimates which was about 67-72% decline, the report added.

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