Aviation industry to lose Rs 21,000 crore in FY21: ICRA

ICRA Research projected that the Indian aviation industry would suffer losses worth Rs 21,000 crore in the current fiscal. The ratings agency, in its latest report on the Indian aviation industry's capacity and passenger growth, maintained a negative credit outlook on the Indian aviation industry, owing to the coronavirus crisis.

Owing to the pandemic, the Ministry of Civil Aviation (MoCA) had suspended all international flight operations starting March 23, 2020, and did the same for domestic flights on March 25, 2020. Scheduled domestic flights were resumed on May 25, 2020, with 33.33 per cent levels of pre-COVID capacities allowed to occupy a plane. On December 3, MoCA increased the permissible capacity levels to 80 per cent, having gradually increased over the past 6 months.

According to ICRA's report, the domestic aviation industry from May 25, 2020, to October 31, 2020, witnessed a year-on-year (YoY) decline of about 73 per cent in its capacity, as measured by the Available Seat Kilometers (ASKM). When faced with the double whammy of the previous damage and the current restrictions on capacity deployment, as well as state-specific quarantine regulations, this is likely to result in a 60 per cent YoY decline in domestic capacity in FY2021. In the same time window, domestic passenger traffic was about 1.64 crore, as against about 8.25 crore in the same period last year, reflecting a YoY decline of 80.1 per cent. ICRA also predicts FY2021 to witness a YoY decline of 62-64 per cent in domestic passenger traffic.

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As far as international flights are concerned, MoCA has allowed operations under the Vande Bharat Mission (VBM) and Air Transport Bubbles (ATB). Under VBM, which started from May 06, 2020, the international passenger traffic for the Indian carriers was about 10,96,709, which indicates a YoY decline of 91.6 per cent.

ICRA mentions in its report that the credit rating agency has a negative credit outlook on the Indian aviation industry, expecting the profitability of the industry to be severely affected in FY2021 owing to lower revenues and high fixed costs of operation. According to ICMR's estimates, the Indian aviation industry is to report a significant net loss of about Rs 21,000 crore against a net loss of Rs 12,700 crore in FY2020. Debt levels too for the industry will be increasing to about Rs 50,000 crore (excluding lease liabilities) over the next financial year (FY2021-22). This, the agency feels, will prompt funding the industry by Rs 35,000-37,000 crore over the next two years.

Mentioning the measures taken by airlines such as salary cuts for employees, leave-without-pay options, and laying off team members (both pilots and crew members), ICRA said that until cash inflows improve, the airlines would be in dire need of external fundings. This, says the credit agency, will weaken the credit profile of domestic airlines in the near future.

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