STOCK MARKET BSE NSE

Indian aviation industry may incur losses worth Rs 26,000 crore in FY 2022: Report

According to ICRA, in the near term, the balance sheets of Indian carriers will remain stressed until they are able to reduce their debt burden.

Published: 31st August 2021 07:19 PM  |   Last Updated: 31st August 2021 07:19 PM   |  A+A-

Midway began its services in 1979 post deregulation of the US aviation industry. Midway was brave enough to face the surge in fuel prices post the Gulf War. However, it went kaput in the November 1991.

For representational purpose. (Photo | AP)

By PTI

MUMBAI: Pandemic-hit Indian aviation industry is expected to report a net loss of Rs 25,000-26,000 crore while its debt level may increase to Rs 1.2 lakh crore in the ongoing fiscal year, credit ratings agency ICRA said on Tuesday.

Also, the industry will be requiring an additional funding of Rs 45,000-47,000 crore over FY2022 to FY2024, it said.

According to ICRA, in the near term, the balance sheets of Indian carriers will remain stressed until they are able to reduce their debt burden through a combination of improvement in operating performance and / or through equity infusion.

ICRA has thus maintained its negative credit outlook on the Indian aviation industry. Most airlines have initiated fund-raising plans to tide over the liquidity crisis stemming from the cash burn due to the impact on demand and increase in jet fuel prices, it said.

The aviation industry is expected to witness a strong year-on-year growth of 45-50 per cent in domestic air passenger traffic and 80-85 per cent in international air passenger traffic during 2021-22, according to ICRA.

It will, however, be achieved on a lower base of the previous fiscal year and driven by the faster pace of vaccination and gradual relaxations in restrictions by the regulatory authorities. However, the growth will still be significantly lower than the 2015-16 and 2012-13 levels, and the industry is expected to report a higher net loss in 2021-22, said ICRA.

"Given the resurgence of the second wave of the pandemic, the recovery in passenger traffic will only be gradual, with the domestic passenger traffic expected to reach pre-COVID levels only by FY2024," said Kinjal Shah, Vice President and Co-Group Head, ICRA.

Elevated ATF prices (higher by 71 per cent Y-o-Y in the five months of FY2022) and fare caps continue to pose a challenge for the profitability of the airlines, she noted.

"Therefore, the Indian aviation industry is expected to report a net loss of Rs 250-260 billion in FY2022. The debt levels will remain high for the industry and are estimated to increase to around Rs 1,200 billion (including lease liabilities) in FY2022, with the industry requiring an additional funding of Rs 450-470 billion over FY2022 to FY2024," Shah said.

The recovery in domestic air passenger traffic is contingent on pace of vaccination, willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, which in turn impacts consumer sentiments and the ability to travel.

Besides, developments related to central and state government-mandated travel restrictions and quarantine norms, and recovery in business travel will also decide the pace of recovery, ICRA said.

Stating that the impact of the pandemic will be more profound and long-lasting on international travel, compared to domestic travel, it said that in addition to these, the recovery in international travel is also contingent on the opening up of scheduled international operations by the government.

Besides, the macroeconomic shock to the global economy and the government-mandated travel restrictions and quarantine norms of various countries will be the deciding factors for the recovery. Significantly, the regular commercial international flight services remain suspended from late March 2020.

The ban has now been extended to September 30.



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp