Millennium Post (Kolkata)
‘Domestic airlines may cut losses to `10K cr this fiscal’
‘These losses, however, will still be 35-40% lower compared to Rs 14,000-15,000 crore estimated losses in FY21’
MUMBAI: Lower domestic air traffic compared with prepandemic level coupled with high fuel prices and only a gradual recovery in international operations may lead to domestic airlines posting around Rs 9,500-10,000 crore losses this fiscal, ratings agency Crisil said on Thursday.
These losses, however, will still be 35-40 per cent lower compared to Rs 14,000-15,000 crore estimated losses in the previous financial year, CRISIL Ratings said. The indicative losses are based on a study of the top three airlines, which account for around 78 per cent of total passenger traffic, it said.
A 25-30 per cent increase in debt (excluding lease liabilities) last fiscal and continuing net losses in the current fiscal will keep their balance sheets under pressure, the ratings agency said, adding high leverage will also result in continued negative outlook for the sector. Noting that a resurgence of Covid-19 infections across the country, especially in Mumbai and Delhi, which account for 36 per cent of the overall air traffic, is expected to stall the recovery seen over the past six months, the ratings agency said, the average daily domestic passenger air traffic has fallen in April by almost 20 per cent to around 2.35 lakh compared to February this year.
Domestic traffic, which accounts for around 75 per cent of airline revenues, is expected to surge 120-130 per cent this fiscal on a low base (68 per cent decline in fiscal 2021), though it will still be significantly lower at around 70 per cent of FY 2020 level.
“Domestic traffic fell 85 per cent in the first half of last fiscal due to lockdowns and restrictions on operations. Despite the second wave-induced fresh curbs, which will temper recovery, domestic traffic in the first half of this fiscal is likely to be 3.5-4 times higher on-year, on a low base.
“The second half should see good recovery in traffic, supported by acceleration in the vaccination drive and people gradually taking to travel after prolonged stay at home, said Gautam Shahi, Director, CRISIL Ratings.
A gradual recovery in international operations in the second half of fiscal 2022 will also boost traffic, he added.
However, airlines have also seen their cost of operations spurt due to a rise in the price of aviation turbine fuel (ATF), a key cost head for them. The price, which remained low until November 2020, limiting their losses, has shot up 30% since then. This will offset the benefits from some of the initiatives the carriers undertook to reduce cost employee costs, rentals, among others, in the last fiscal, and which are being carried forward into the current fiscal, it said.