CAPA India expects that Indian airlines will lose a consolidated US$ 4.1 billion in FY2022. This will take total losses over the two years to around US$ 8 billion as a result of the two Covid waves.

CAPA India argues that the government must provide immediate fiscal relief to the aviation sector, some of which could include bringing aviation turbine fuel under the GST framework; rationalisation of fuel excise to 4 per cent as it was earlier; and a reduction in GST on aircraft spares.

As the CAPA India Airline Outlook FY2022 report suggests, “We expect that Indian airlines will lose a consolidated US$ 4.1 billion in FY2022, similar to that in FY2021. This will take total losses over two years to around US$ 8 billion as a result of the two Covid waves. FSCs are expected to contribute US$ 2.1 billion of losses while LCCs would account for US$ 2 billion. The projected losses could rise further if necessary recapitalisation comes in the form of debt, for which borrowing costs will need to be included. At this stage it is not known how recapitalisation will be funded. Air India and IndiGo combined will represent around US$ 4.5 billion of the approximately US$ 8 billion of losses.”

After taking into account the impact of the second wave, CAPA India’s proprietary forecasting model projects domestic traffic of 80-95 million airline passengers in FY2022, up from 52.5 million in FY2021, but well below the close to 140 million passengers in FY2020. This projection does not take into account a third wave.

As CAPA in its report suggests, “Bearing in mind the considerable uncertainty that exists in the market, our guidance based on currently available information is for traffic towards the bottom end of the range at around 80 million. After a massive slump in April and May, we expect to see a moderate recovery in June as activity returns, with an acceleration in traffic from Q2. As was the case in the second half of FY2021, we expect to see rising confidence and continued traffic recovery in the second half of this financial year.”
Outlining its outlook for FY2022, CAPA notes that while international traffic is projected to be in the range of 16-21 million passengers, based on current settings it is likely to be constrained towards the lower end of the range because of border restrictions, market access and other strategic risks. As with domestic traffic, the second half of the year is expected to be far more positive. Partly due to the easing of restrictions and the expansion of bubble agreements, but also due to the prospects of increased international capacity deployment by Indian carriers, for example Vistara is likely to launch routes to North America and other long-haul destinations with its fleet of four 787s.

In a desperate call for help, CAPA notes that the aviation industry is “standing on the edge of a cliff and this is true even for airlines with access to large pools of capital.”

Source: Economic Times