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Airlines in doldrums: Worst seems to be over but profit remains out of sight

In its latest report, the Centre for Asia Pacific Aviation India (CAPA) said that the industry is heading towards consolidation and it could result in a 2-3 airline system in the near to medium term.

Published: 10th January 2021 02:11 AM  |   Last Updated: 10th January 2021 09:54 AM   |  A+A-

RGIA | (File Photo | R.Satish Babu )

Hyderabad airport. (File Photo | R.Satish Babu )

By Express News Service

NEW DELHI:  After surviving its worst year, India’s aviation industry is heading towards an eventful 2021. With the national carrier Air India expected to find a buyer this year and Jet Airways readying to restart operations, the industry is all set to witness changes in market dynamics.

In its latest report, the Centre for Asia Pacific Aviation India (CAPA) said that the industry is heading towards consolidation and it could result in a 2-3 airline system in the near to medium term. 

CAPA added that following the privatisation of Air India, the airline sector is likely to be dominated by two major players, with a combined domestic market share of around 75-80 per cent. As of now, Tata Group is seen as the most serious party to acquire Air India.

Experts believe if the salt to steel conglomerate brings its aviation business under one roof, it will end up controlling 25-30 per cent of the domestic market.

Besides IndiGo and Tata Group (if it acquires AI), the other player projected to remain strong is SpiceJet. “We expect SpiceJet to be a larger beneficiary in FY22 as the B-737s get inducted. With 737 MAX deliveries expected to resume from Q4FY21, we expect SJ to continue to lead industry growth at over 20 per cent,” said analysts at Edelweiss. 

Despite these big changes, however, the sector is unlikely to report profit. Analysts at Edelweiss expect demand to gather significant momentum only from mid- calender year 2021.

As of November end, domestic traffic is down by 51 per cent year on year. According  to CAPA, losses are expected to deepen in FY22 as both domestic and international demand recovery remains uncertain.



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