CAPA: Indian airline sector to shrink losses in 2020

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 lowcost carriers returning to profitability, aviation consultancy CAPA India said.

Its forecast is for Indian carriers to lose a collective US$550mil to US$700mil for financial year 2020, against an estimated US$1.7bil 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 US$1.9bil issued in September when oil prices were higher.

“The opportunity exists to create a sustainable, profitable future within one to two years,” CAPA India CEO Kapil Kaul said as the forecast was released at its annual conference in New Delhi.

“This will drive serious 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 are tapping rising demand from a growing middle class in the world’s fastest-growing 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 US$50 one-way tickets on the two-hour flight from Mumbai to Delhi.

High fuel prices, a weak rupee and intense competition dragged down airline financial results for much of 2018.

But fares are on the rise with lowcost carriers IndiGo and SpiceJet Ltd reporting higher yields and swinging to net profits in the quarter ended Dec 31 after losses earlier in the financial year.

Budget carriers, which include IndiGo, SpiceJet, AirAsia India and GoAir are expected to post a combined profit of US$100mil to US$150mil in the 2020 year, whereas full-service carriers Air India, Jet Airways Ltd and Vistara would rack up US$700mil to US$800mil of combined losses, CAPA India said.

Jet Airways, which controls a sixth of India’s aviation market and has net debt of US$1.13bil, is seeking a financial bailout with money owed to employees, vendors and aircraft lessors.

The airline is in talks with shareholder Etihad Airways and key lender State Bank of India for a rescue deal but for any proposal to be accepted, its founder and chairman Naresh Goyal would need to give up his controlling stake, sources have said.

The opportunity exists to create a sustainable, profitable future within one to two years.

Kapil Kaul