The pandemic-hit Indian aviation industry is predicted to report a net loss of Rs 25,000-26,000 crore while its debt level may increase to Rs 1.2 lakh crore within the ongoing financial year, credit rating agency ICRA said on Tuesday.
Also, the industry is going to be requiring additional funding of Rs 45,000-47,000 crore over FY2022 to FY2024, it said.
According to ICRA, within the near term, the balance sheets of Indian carriers will remain stressed until they’re ready to reduce their debt burden through a mixture of improvement in operating performance and/or through equity infusion.
ICRA has thus maintained its negative credit outlook on the Indian aviation industry.
Most airlines have initiated fund-raising plans to bridge over the credit crunch stemming from the cash burn thanks to the impact on demand and increase in jet fuel prices, it said.
The aviation industry is predicted to witness a robust year-on-year growth of 45-50 percent in domestic air passenger traffic and 80-85 percent in international air passenger traffic during 2021-22, consistent with ICRA.
It will, however, be achieved on a lower base of the previous financial year and driven by the faster pace of vaccination and gradual relaxations in restrictions by the regulatory authorities.
However, the expansion will still be significantly less than the 2015-16 and 2012-13 levels, and therefore the industry is predicted to report a better net loss in 2021-22, said ICRA.
“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 succeed in pre-COVID levels only by FY2024,” said Kinjal Shah, vice chairman, and Co-Group Head, ICRA.
Elevated ATF prices (higher by 71 percent Y-o-Y within the five months of FY2022) and fare caps still pose a challenge for the profitability of the airlines, she noted.
“Therefore, the Indian aviation industry is predicted to report a net loss of Rs 250-260 billion in FY2022. The debt levels will remain high for the industry and are estimated to extend to around Rs 1,200 billion (including lease liabilities) in FY2022, with the industry requiring further funding of Rs 450-470 billion over FY2022 to FY2024,” Shah said.
The recovery in domestic air passenger traffic is the contingent on pace of vaccination, the willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, which successively impacts consumer sentiments and therefore the ability to travel.
Besides, developments associated with central and state government-mandated travel restrictions and quarantine norms, and recovery in business travel also will decide the pace of recovery, ICRA said.
Stating that the impact of the pandemic is going to be more profound and long-lasting on international travel, compared to domestic travel, it said that additionally to those, the recovery in international travel is additionally contingent on the opening from scheduled international operations by the govt.
Besides, the macroeconomic shock to the worldwide economy and therefore the government-mandated travel restrictions and quarantine norms of varied countries are going to be the deciding factors for the recovery.
Significantly, the regular commercial flight services remain suspended from late March 2020. The ban has now been extended to September 30.