Indian airlines set for $600-million loss in FY20, says CAPA report

Indian airlines will post a combined loss of $600 million and induct fewer aircraft in the current financial year, aviation consultancy CAPA said in its latest report.

CAPA has revised its earnings estimate for Indian carriers from its June forecast of $500-700 million in profit, following weak results by market leader IndiGo and SpiceJet. 

The two carriers posted losses of Rs 1,062 crore and Rs 462 crore, respectively, in the September quarter.

Aggressive expansion, coupled with price wars, and an increase in maintenance costs, has also hit cash flows. “Most carriers except IndiGo continue to be precariously placed, with cash balances available, in some cases, to cover only a few days or weeks of expenses,” said CAPA.

CAPA expects IndiGo to post an annual profit of $70-90 million — far lower than the $400-500 million guided for in June — given the changes in accounting norms and increased provisioning on aircraft maintenance.  SpiceJet could be headed for a second year of loss after posting its weakest quarterly results since 2015, it added. AirAsia India, Vistara, and Air India are also on course to posting losses for the year, though GoAir is expected to register a $25-30 million profit. 

CAPA estimates Air India to post a loss of $500 million this year, due to the grounding of over 20 aircraft and its inability to capitalise on Jet Airways’ closure.

“Potential benefits of consolidation and capacity rationalisation in the wake of Jet’s demise, as well as 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,” CAPA said. 

Domestic air traffic grew 11 per cent in November — the first double-digit growth month in CY20 — on lower fares and recovery of lost capacity, following Jet’s closure. Domestic carriers operated a total of 628 aircraft in November, up from 614 in January. 

Fresh capacity addition, however, has been muted because of the challenges surrounding Airbus A320neo engines, and the regulatory ban on Boeing 737 aircraft.

While CAPA had, in June, estimated the combined fleet size of airlines by the end of the year at 709-726, it has now pegged the fleet count at 710-717.  GoAir, AirAsia India, and SpiceJet will induct fewer planes than estimated, it said.