Airlines stare at $4.1 bn loss
Hit by the second wave, India’s airline companies are likely to register a consolidated loss of about $4.1 billion in FY22, similar to the losses clocked in FY21, provided there is no third wave of the pandemic this year. The companies will require $5 billion of recapitalisation this financial year to survive.
"We expect that Indian airlines will lose a consolidated $4.1-billion in FY22, similar to that in FY2021. This will take total losses over two years to around $8 billion as a result of the two Covid-19 waves," aviation consultancy firm Capa India said in a report.
The report finds that the full-service carriers are expected to contribute as much as $2.1 billion in the total losses this year, while the budget carriers would account for the remaining $2 billion.
Full-service carrier Air India and no-frills player IndiGo together will account for around $4.5 billion of the combined $8 billion of losses in two years.
The projected losses could rise further if necessary recapitalisation comes in the form of debt, as the borrowing costs will have to be included.
Capa estimates that the airline companies will require close to $5 billion of recapitalisation in FY22 just to survive. Out of this, around $1.1billion is in the pipeline in the form of Initial Public Offering,
Qualified Institutional Placement and other financial instruments. If these plans materialise, the incremental requirement could be reduced to $3.5 billion.
The government had recently expanded Emergency Credit Line Guarantee Scheme (ECLGS) to include civil aviation in the scheme. The scheme has already sanctioned Rs 2.54 lakh crore of loans and will be valid up to September end or till the unutilised amount in the Rs 3 lakh crore under the scheme is exhausted.
Capa also expects domestic airline traffic to pick up to 80-95 million during FY22, far higher than 52.5 million traffic recorded in FY21, but well below the 140 million registered during FY20. Capa estimates a moderate recovery in June after the second wave subsides. However, its projections did not take a possible third wave into consideration.
"After a massive slump in April and May, we expect to see a moderate recovery in June as activity returns, with an acceleration in traffic from the second quarter.
"As was the case in the second half of FY2021, we expect to see rising confidence and continued traffic recovery in the second half of this financial year," Capa said.
According to rating and research firm Icra, domestic air traffic nosedived to 19.20 lakh passengers in May from around 57.3 lakh in April, registering a sharp 65-67 per cent month-on-month contraction. Average daily departures were around 900 against 2,000 in April 2021 and average number of passengers per flight in May was 72, against 93 passengers in April 2021.
International passenger traffic stood at around 1.4 lakh in May, a sequential decline of around 96 per cent. The international traffic is projected to be in the range of 16-21 million passengers for the year.