Domestic aviation sector may post a net loss of Rs 26,000-Cr this financial year: Icra

The domestic aviation industry is expected to record a net loss of Rs 25,000-26,000 crore this financial year as high jet fuel prices and tariff caps continue to pose a major challenge to airline profitability, the agency said. ICRA Ltd national rating on March 3.

Domestic airlines, however, are expected to post a reduced net loss of Rs 14,000-16,000 crore in the next financial year on the back of a “significant recovery” in air passenger traffic and lower levels of debt, it said. said CIFAR.

The rating agency also estimates that the industry will need additional funding in the range of Rs 20,000-22,000 crore in FY22-24. ICRA said it expects domestic air passenger traffic to see strong year-on-year growth of 50-55% in 2021-22, supported by the rapid pace of vaccination and gradual easing restrictions by regulatory authorities.

However, that recovery will be on a much weaker fiscal 2021 base, he said. He added that this will be significantly lower than pre-COVID-19 levels, given that recovery to pre-COVID-19 levels is expected by FY2024.

“With the onset of the second wave of the pandemic and the subsequent emergence of the Omicron variant, the recovery in passenger traffic has remained gradual over the current fiscal year. (on an 11-month annual basis of the current fiscal year 2022) and maintaining price caps continue to pose a major challenge to airline profitability,” said Suprio Banerjee, Vice President and Sector Head of ICRA Ltd.

As a result, India’s aviation industry is expected to report “a net loss of Rs 250-260 billion (Rs 25,000-26,000 crore) in the financial year 2022”, according to earlier estimates from ICRA, it said. he declared. However, the expected start of regular international operations and the waning wave of Omicron will lead to a noticeable recovery in passenger traffic in fiscal year 2023, Banerjee said.

“Coupled with lower debt levels, which are expected to reduce to around Rs 1 trillion (including lease debts) in FY 2022, due to a noticeable reduction in debt levels of Air India Ltd before the sale of the stake, net losses are expected to narrow to around Rs 140. -160 billion for fiscal year 2023,” he said.

This even though airlines will have to pay much higher fuel bills in fiscal year 2023, due to a sharp rise in crude oil prices amid growing geopolitical developments around the Russian-Ukrainian conflict, he said. added Banerjee.

While the debt reduction in FY2022 is largely due to a notable reduction in Air India Ltd’s debt level prior to its stake sale, ICRA said it continues to maintain its outlook. negative credit ratings on the Indian aviation industry. This is due to high ATF prices, the overhang of the recent COVID-19 wave, and the continued suspension of scheduled international travel.

The recovery in domestic air passenger traffic is expected to be supported by pent-up demand in the leisure travel segment and a gradual resumption of business travel as corporate offices move into the recovery phase, following the third wave, CIFAR said.

The impact of the pandemic has been deeper and more lasting on international travel than on domestic travel, with regular international operations still suspended, he said. In the near term, Indian carriers’ balance sheets will remain stretched until carriers are able to deleverage through a combination of improved operating performance and/or equity injections, the agency says. rating.

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