Indian airlines will need ₹35,000-crore till 2022-23, says ICRA1 min read . Updated: 14 May 2020, 04:20 PM IST
- The airlines will see 41-46% and 67-72% contraction in domestic and global passenger traffic, respectively, in FY2021
- The aviation industry's net debt may rise to ₹46,500 crore by 2021-22, ICRA said
NEW DELHI: The Indian aviation industry, which is currently non-operational under the coronavirus-led lockdown, will require funding of up to ₹35,000 crore till 2022-2023 as profitability may take a hit due to sharp fall in revenues and higher fixed costs, credit rating agency, ICRA, said in a statement on Thursday.
The airlines are estimated to report a 44% decline in revenue in 2020-21, as compared to the previous year, while the industry's net debt may rise to ₹46,500 crore by 2021-22, ICRA said.
"Overall, the industry will witness about 41-46% contraction in domestic passenger traffic and about 67-72% fall in international passenger traffic for the Indian carriers in FY2021," it said.
"The profitability of the industry will also be adversely impacted in FY2021 due to lower revenues and high fixed costs (35-42% of the total cost of airlines)," it added.
All airlines and airport operations are halted since 25 March, the starting day of the most stringent lockdown in the world. The country is in the third phase of the lockdown that ends on 17 May. The lockdown will be extended to a fourth phase, albeit with more relaxations and guidelines.
“Considering the daily net loss of about ₹75-90 crore during the shutdown of operations and the expected weak demand, the Indian aviation industry will require additional funding of ₹325-350 billion over FY2021-23," said Kinjal Shah, vice president at ICRA.
Meanwhile, the industry is pushing for an early resumption of domestic flights from key metros and has warned that a prolonged lockdown could cripple their operations forever.
ICRA said the recent directives from the aviation regulator, Directorate General of Civil Aviation (DGCA), urging airlines to not allow booking of air tickets and provide full refund on certain cancellations, without levying any cancellation charges, will result into further cash flow pressures
"Thus, the liquidity position of airlines has deteriorated sharply due to the high fixed costs and accumulated liabilities from sold but not flown tickets. Overall, the credit profile of domestic airlines will weaken materially over the near-term," Shah said.
Considering that air travel will remain muted during 2020-21, airlines will also delay their aircraft purchases and deliveries on the back of weak demand.
"Lower demand implies that airlines will be operating at much lower load factors and would continue to see many of their aircraft grounded even when the operations resume," Shah added.