Indian airlines to report combined loss of ₹260 bn in FY22

“In the near term, the balance sheets of Indian carriers will remain stressed until the carriers are able to reduce their debt burden through a combination of improvement in operating performance and/or through equity infusion. Icra has thus maintained its negative credit outlook on the Indian aviation industry,” Icra said.

Most airlines have initiated fund-raising plans to tide over the liquidity crisis stemming from the cash burn due to impact on demand and increase in ATF prices, it added.

Indian airlines have been adversely impacted by the ongoing covid-19 pandemic, which has resulted in lower demand for air travel.

However, air passenger traffic is expected to rebound in the current fiscal year (FY2022) due to a pick up in vaccination drive and state governments withdrawing travel restrictions amidst falling number of active covid-19 cases, through the air passenger traffic recorded during FY2022 is expected to widely lag the levels seen in FY2013 and FY2016.

During FY2022, domestic air passenger traffic is expected to witness a strong annual growth of about 45-50% and international air passenger traffic about 80-85%, albeit on a lower base of FY2021, and driven by the faster pace of vaccination and gradual relaxations in restrictions by the regulatory authorities, Icra said in the statement.

“However, the growth will still be significantly lower than even the FY2016 and FY2013 levels, respectively; and the industry is expected to report a higher net loss in FY2022,” it added.

Icra expects the recovery in domestic air passenger traffic to be contingent on the following five factors – pace of vaccination, willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, which in turn impacts consumer sentiments and the ability to travel, Central and various state government-mandated travel restrictions and quarantine norms, and recovery in business travel.

Meanwhile, the impact of the pandemic is expected to be more profound and long-lasting on international travel, compared to domestic travel with the recovery in international travel also contingent on the opening up of scheduled international operations by the Government of India, the macroeconomic shock to the global economy and the Government-mandated travel restrictions and quarantine norms of various countries.

“Given the resurgence of the second wave of the pandemic, the recovery in passenger traffic will only be gradual, with the domestic passenger traffic expected to reach pre-Covid levels only by FY2024,” said Kinjal Shah, vice president and co-group head at Icra Limited.

“Elevated ATF prices and fare caps continue to pose a challenge for the profitability of the airlines. The debt levels will remain high for the industry and are estimated to increase to about Rs. 1,200 billion ( ₹1,20,000 crore), including lease liabilities, in FY2022,” Shah added.