Indian aviation to report ₹260 bn loss in FY22; need ₹470 bn by FY2024

September 6, 2021: According to the credit rating agency ICRA, the Indian domestic aviation industry is expected to witness strong Y-o-Y growth of 45-50 percent in domestic air passenger traffic and 80-85 percent in international air passenger traffic during FY2022, albeit on a lower base of FY2021 and driven by the faster pace of vaccination and gradual relaxations in restrictions by the regulatory authorities.

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, says an ICRA note.

Kinjal Shah, vice president and co-group head, ICRA, said, “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. Elevated ATF prices (higher by 71 percent on a Y-o-Y basis in 5M FY2022) and fare caps continue to pose a challenge for the profitability of the airlines. Thus, the Indian aviation industry is expected to report a net loss of ₹250-260 billion in FY2022. The debt levels will remain high for the industry and are estimated to increase to ₹1200 billion (including lease liabilities) in FY2022, with the industry requiring additional funding of ₹450-470 billion over FY2022 to FY2024.”

The impact of the pandemic will be more profound and long-lasting on international travel, compared to domestic travel. In addition to the above factors determining the recovery in passenger traffic, the recovery in international travel is 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.

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. 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.