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Indian airlines are expected to incur losses worth $3.5-4 billion, excluding any adjustments, in this financial year, aviation consultancy firm Capa India said. The carriers would need continuous flow of capital, including fund infusion of $1 billion during the October-March period, to overcome these losses, Capa said in a mid-year outlook for FY22.

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

Despite the revival of air passenger traffic, high fuel costs remain a concern for airlines and is likely to prevent airlines from breaking even or reporting a profit during the December quarter, the consultancy firm said.

Capa added that it expects 80-95 million domestic passengers, and 16-21 million international passengers during FY22.

As per Capa estimates, airlines such as SpiceJet Ltd will require funding of up to $400 million to continue its operations.

“SLBs (sale and leaseback of aircraft) will contribute $300-400 million (for SpiceJet) in FY2023/24. But, relying on Boeing compensation and SLBs alone will be a risk," it said.

Under an SLB transaction, an owner sells the aircraft and then leases it back from the buyer, thus making a profit. Such a deal 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 Tata Group-operated Vistara and AirAsia India may require additional capital infusion, Capa said.

IndiGo, run by InterGlobe Aviation Ltd, may need to carry out a qualified institutional placement next fiscal to raise funds, Capa said.

Tata Group’s acquisition of Air India Ltd 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 as a result scramble to hire talent as the industry faces a shortage of up to 50-70 senior/mid-level managers.

“(We) expect to see renewal of senior executives/leadership across airlines. A new management order is likely post-covid," Capa said. “Some carriers may need to strengthen their management teams across functions, (while) others may need to replace," it added.

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

“(Akasa is) seen as a major emerging player based on financial strength and hiring strategy," Capa said in the report.

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

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