Airline sector to shrink losses next year: CAPA
NEW DELHI: India’s airlines are poised to cut their cumulative losses by as much as two-thirds in the financial year starting in April due to a more stable oil price, with low-cost carriers returning to profitability, aviation consultancy CAPA India said on Tuesday.
Its forecast is for Indian carriers to lose a collective $550 million to $700 million for financial year 2020, against an estimated $1.7 billion loss for the 2019 year ending in March.
The latter figure is an improvement to CAPA India’s last forecast for losses of up to $1.9 billion issued in September when oil prices were higher.
“The opportunity exists to create a sustainable, profitable future within 1-2 years,” CAPA India chief executive officer (CEO) Kapil Kaul said as the f orecast was released at i t s annual c onference i n New Delhi.
“This wil l dri ve s e r i ous investor interest given the size of the market.”
A narrowing of losses will ease the pressure on Indian carriers in financing the hundreds of Airbus SE and Boeing Co jets they have on order.
They a r e t a ppi ng r i s i ng demand from a growing middle class in the world’s fastestgrowing major domestic aviation market and expanding operations internationally.
Domestic air traffic is forecast to rise by 14 to 16% in financial year 2020, CAPA India said, with international traffic set to be 10% to 12% higher as the Indian fleet expands by more than 90 aircraft.
Cut-throat competition has made India one of the world’s cheapest domestic airline markets with deals such as $50 oneway tickets on the two-hour
INDIGO, SPICEJET, AIRASIA INDIA AND GOAIR ARE EXPECTED TO POST A COMBINED PROFIT OF $100-150 MN IN THE YEAR 2020.
flight from Mumbai to Delhi.
High f uel prices, a weak rupee and intense competition dragged down airline financial results for much of 2018.
But fares are on the rise with low-cost carriers such as Indigo and Spicejet Ltd reporting higher yields and swinging to net profits in the quarter ended December 31 after losses earlier in the financial year.
Budget c a r r i e r s , which include airlines such as Indigo, Spicejet, Airasia India and Goair are expected to post a combined profit of $100 million to $150 million in the 2020 year.
Whereas, full-service carriers Air India, Jet Airways Ltd and Vistara will rack up $700 million to $800 million of combined losses, CAPA India said on Tuesday.
Jet Airways, which controls a sixth of India’s aviation market and has net debt of $1.13 billion, is seeking a financial bailout with money owed to employees, vendors and aircraft lessors.
The airline is in talks with its shareholder Etihad Airways and key lender State Bank of India (SBI) for a rescue deal, but for any proposal to be accepted, its f o under a nd c hai r man Naresh Goyal would need to give up his controlling stake, people familiar with the matter have said.
National carrier Air India, which has transferred interest payment liabilities of ₹29,000 crore of its total debt to a special purpose vehicle, has suggested that the government refinance ₹20,000 crore debt by March 31.
The move, if successfully implemented, will significantly reduce interest payment on these loans, a senior official of the airline said on Tuesday. Air India’s current annual interest payment to banks is about ₹4,400 crore. This will come down to ₹1,500 crore annually after the banks give their approval.