Indian airlines expected to suffer losses of up to $ 4 billion in fiscal 22

Indian airlines are expected to suffer losses worth $ 3.5 billion to $ 4 billion, excluding adjustments, in this fiscal year, aviation consultancy firm Capa India said. The carriers would need a continued flow of capital, including a $ 1 billion cash injection during the October-March period, to overcome these losses, Capa said with a mid-year outlook for the exercise 22.

Domestic passenger air traffic is expected to remain strong until December, but could face some uncertainty from January to March next year, according to Capa. Daily domestic traffic is expected to stabilize at between 350,000 and 375,000 passengers in the four months to March, Capa said.

Despite the resumption of passenger air traffic, high fuel costs remain a concern for airlines and are likely to prevent airlines from balancing or generating profits in the December quarter, said the consulting firm.

Capa added that it expects 80 to 95 million domestic passengers and 16 to 21 million international passengers in FY 22.

According to Capa’s estimates, airlines such as SpiceJet Ltd will need funding of up to $ 400 million to continue their operations.

“SLBs (aircraft sale and leaseback) will contribute $ 300 million to $ 400 million (for SpiceJet) in fiscal year 2023/24. But, relying solely on compensation from Boeing and SLBs will be a risk, ”he said.

In an SLB transaction, an owner sells the aircraft and then re-leases it to the buyer, making a profit. Such an agreement typically removes the aircraft and its associated debt from the carrier’s balance sheet.

Airlines like GoFirst will seek to raise $ 450 million through a planned public listing, while Vistara and AirAsia India, operated by Tata Group, may require an additional infusion of capital, Capa said.

IndiGo, led by InterGlobe Aviation Ltd, may need to make a qualified institutional placement in the next fiscal year to raise funds, Capa said.

The acquisition of Air India Ltd by the Tata Group and the entry of two new players, Akasa and Jet Airways 2.0, will impact airlines, especially domestic market leader IndiGo, Capa said, adding that airlines could therefore scramble to hire talent as the industry faces a shortage of 50 to 70 senior / middle managers.

“(We) expect a renewal of senior management / leadership in all airlines. A new management order is probably post-covid, “Capa said.” Some carriers may need to strengthen their management teams across functions, (while) others may need to replace, “he said. -he adds.

Meanwhile, the launch of billionaire investor Rakesh Jhunjhunwala, ultra-low-cost carrier Akasa, is expected to disrupt the market from FY25, once the airline reaches scale and cost base. competitive.

“(Akasa is) considered a major emerging player based on its financial strength and recruitment strategy,” Capa said in the report.

However, consolidation in the aviation sector seems unlikely for this fiscal year, he said, adding that consolidation risks remain during FY23-24.

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