Indian airlines to shrink losses in FY20, says Capa
Airlines in India are expected to sharply narrow their annual losses in the next financial year as a result of a fall in jet fuel prices and higher fares, aviation advisory firm Capa India said on Tuesday.
Budget as well as full-services carriers are expected to lose between $550 million-700 million in FY20, compared with a combined loss of up to $1.7 billion this year through March, said Kapil Kaul, Capa’s chief executive officer (CEO) and director South Asia, at the Capa India annual summit in New Delhi.
This year’s figure is an improvement from the $1.9 billion loss expected by Capa in its previous outlook issued in September when crude oil prices were trending higher.
Jet fuel prices have dropped 24% since November 1, when it touched the 2018 high of ₹76,378.80 a kilolitre in New Delhi, according to Indian Oil Corp.’s website.
The latest forecast is likely to cheer airlines as well as investors in India’s aviation industry where most of the carriers are struggling financially and saddled with large debt.
“There exists an opportunity to create a sustainable, profitable future within 1-2 years,” Kaul said.
“This will drive serious investor interest given the size of the market.” He said new investors are expected to come on board at two to three domestic carriers in the next financial year while one airline is likely to be acquired.
“We expect industry to consolidate with around four to five airlines (by FY20),” he said, adding that Air India could be privatized if key decisions are taken with respect to hiving off working capital debt.
Capa India estimates domestic traffic to grow 14%-16% annually from FY20. At the same time, international traffic is expected to grow 10-12% as local carriers add more than 90 planes to their fleet.
The government’s regional air connectivity scheme is, however, expected to continue to struggle, he added. Capa’s executive chairman Peter Harbison said India’s new aviation policy has created potential for establishing hubs for long-haul flights.
“It has become easier now ( to establish hubs) as airport infrastructure is being developed,” he said.