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Indian airlines likely to post loss of over $600m this fiscal: Report

Published : Sunday, 15 December, 2019 at 12:00 AM  Count : 48

NEW DELHI, Dec 14: Indian carriers are estimated to report a consolidated net loss of over $600 million (over Rs 4,230 crore) in 2019-20, according to aviation consultancy CAPA as it downgraded its full-year profitability projection made in June.
In June, it projected a consolidated net profit of $500-700 million in the optimistic case.
Currently, there are four budget carriers and two full service airlines -- IndiGo, GoAir, SpiceJet, AirAsia India, Vistara and Air India.
In its quarterly market update report on aviation outlook FY2020, CAPA India said it is the "most significant downgrade within one quarter in more than 16 years".
The carriers are anticipated to post a consolidated net loss of more than $600 million this financial year, as per projection at the end of November.
The financial projections are based on the assumptions that oil prices are in the range of $60-65 per barrel, exchange rate is Rs 70-72 against dollar and that airlines maintain pricing discipline.
Noting that it has revised downwards full-year profitability projections for all carriers, it said the industry has failed to capitalize on Jet Airways' closure and relatively softer fuel prices, as evidenced by an estimated industry loss of $350-400 million in the second quarter of the current fiscal.
"The potential benefits of consolidation and capacity rationalisation in the wake of Jet's demise, and relatively benign fuel prices, have largely been squandered. Carriers pursued very aggressive expansion in an effort to capture slots released by Jet, resulting in downward pressure on yields," the report, dated December 12, said.
About Air India, it said the airline's privatisation is expected to be well underway before the end of FY 2020.
"In our earlier estimates, CAPA expected that Air India would report a loss of around $150 million in FY 2020, its best result in over a decade, in light of the unique circumstances presented by the closure of its largest full service competitor.
"However, these estimates have now been revised to a loss of $500 million, and possibly significantly more. This deterioration in the outlook is a result of Air India not having been able to fully take advantage of the opportunity available on international routes despite Jet's exit and higher fares on international routes," it added.
CAPA India said the situation is the result of 26 aircraft of Air India still remaining on the ground due to a shortage of funds to be able to carry out required maintenance checks.
"The government of India has been unwilling to commit the necessary public funds in advance of a possible imminent transfer to a private owner. However, the converse approach would benefit the exchequer.    -PTI

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