NEW DELHI: Airlines in India are set to incur a consolidated loss of $4.1 billion in the ongoing fiscal due to the havoc caused by Covid-19, aviation consultancy firm CAPA said in its FY22 Airline Outlook.
Additionally, they will need about $5 billion of recapitalisation to survive from the pandemic that has
reduced air traffic by as much as 90 per cent in recent weeks.
“We expect that Indian airlines will lose a consolidated $4.1-billion in FY22, similar to that in FY21. This will take total losses over the two years to around $8 billion as a result of the two Covid waves,” CAPA said in the report.
It estimates full-service carriers to contribute as much as $2.1 billion in the total losses this fiscal, while the budget carriers would account for the remaining $2-billion.
Company wise, national carrier Air India and leading player IndiGo together will represent around $4.5 billion of the combined $8 billion loss.
What’s more worrying is that the industry is likely heading into a higher-cost environment with crude prices hitting record levels and currency depreciation.
Airport charges are also expected to be a potential challenge, the report said.
On the much hyped Air India sales, CAPA said that the government’s intention to exit the national carrier is the right strategy but must be pursued aggressively.
However, the reality is that short-listed bidders may find it difficult to prepare bids in the current environment.
“Given the market conditions, an investor is faced with the prospect of close to $20bn of liabilities before the business turns around after say FY25. The government must keep this massive financial burden in mind and consider making changes to the terms and conditions,” it said, adding that the government must have a Plan B in place now, which can be immediately operationalised if required.
Meanwhile, CAPA said if the Air India divestment does not proceed, the Indian aviation sector may emerge from the pandemic with more airlines.
It is possible that 1-2 start-ups may be launched, resulting in 8-9 carriers in total, it added.
Domestic air passenger traffic in FY22, CAPA said, is likely to be at 80-95 million, up from 52.5 million in FY21 but still below pre-pandemic levels.