ICRA Predicts Indian Aviation Industry to Lose Rs..21,000 Crore this FY

ICRA (Investment Information and Credit Rating Agency) mentioned that Indian Aviation industry could lose Rs.21,000 crore this COVID-impacted fiscal due to lower revenue and high fixed costs. The industry nearly lost Rs.12,700 crore in the last fiscal year, as per TOI report. The rating agency also predicted the industry’s debt level will increase to about Rs.50,000 crore excluding lease liabilities over FY 2021-22. The industry will need additional funding of Rs.35,000-37,000 crore over the next two fiscal years, ICRA added.

ICRA’s Vice President Kinjal Shah said, “The two listed airlines (IndiGo and SpiceJet) have together lost Rs.31 crore per day during H1FY2021. As the airlines gradually recommenced domestic operations, along with continued chartered and cargo operations, their daily cash burn started reducing. This resulted in a lower daily loss of Rs.26 crore for the two listed airlines in Q2 FY2021, against Rs.37 crore in Q1 FY2021.”

“With a sequential improvement in domestic passenger traffic,

"The impact of COVID will more be left by international travel compared to domestic, and hence ICRA expects FY2021 international passenger traffic for Indian carriers to witness a YOY decline of 88-89 percent, higher than its earlier estimates of 67-72 percent decline"

and continued cost rationalization initiatives by the airlines, further supported by the benign aviation turbine fuel (ATF) prices, the daily cash burn for airlines has further reduced in Q3 FY2021.”

She also added that ICRA expects FY2021 to witness a higher decline of 62-64 percent in domestic passenger traffic, than its earlier estimates of 41-46 percent decline. With this, the domestic passenger traffic will reach much lower than the FY2011 levels. Kinjal also added that the recovery in air travel is expected to be gradual one the COVID-19 threat is allayed.

However, the impact of COVID will more be left by international travel compared to domestic, and hence ICRA expects FY2021 international passenger traffic for Indian carriers to witness a YOY decline of 88-89 percent, higher than its earlier estimates of 67-72 percent decline.