Domestic airline losses to go down in FY20: CAPA

Aviation consultancy CAPA estimates airline industrywide losses in India will reduce to $500-700 million in FY20 but forecasts slower domestic traffic growth as airlines focus on international routes.

For FY19, CAPA has projected domestic airlines to collectively post a loss of $1.7 billion. The airlines are expected to improve their financial performance in FY20 on the back of lower fuel costs and pricing discipline. CAPA released its India outlook at a summit in New Delhi on Tuesday.

The consultancy expects industrywide loss between $500-700 million in FY20 with full-service airlines making a loss of $700800 million and low-cost carriers making a profit of $100-150 million. The loss forecast assumes crude oil price at $65-70 per barrel and dollar-Rupee rate of $70-72.

CAPA expects domestic airlines to increase capacity by 20 per cent and add 90 planes in the next fiscal year. Around 30-35 of the new planes will be used for international expansion, which will be largely led by IndiGo, said Kapil Kaul, chief executive officer (South Asia), CAPA.

Domestic traffic will grow by 14-16 per cent as airlines focus on international routes, CAPA has said.

In FY19, the domestic traffic growth is expected at 18 per cent and airlines are expected to carry 145 million passengers.

Another reason for softer demand in the domestic market would be rationalisation of fares. Fares have hardened and airlines stopped last-minute discounting to improve their revenue.

SpiceJet Chairman Ajay Singh said average fares in domestic market had declined due to a massive capacity expansion and discounting. He said Indian carriers needed to discover newer markets and that the airline was looking at medium-haul international routes with its Boeing 737 Max planes. “Our focus is to increase our yield and profitability,” he said.