At record Rs 20,000 cr, airlines may see 44% rise in FY22 loss: CRISIL

This would be 44% higher than the Rs 13,853 crore loss reported last year, agency says

Indian airlines are expected to post a record loss of over Rs 20,000 crore in the current financial year (April 2021-March 2022, or FY22) because of the third wave of the Covid-19 pandemic and higher aviation turbine fuel prices, rating agency CRISIL said on Friday.

The FY22 loss would be 44 per cent higher than the loss of Rs 13,853 crore reported last year, it added. CRISIL analysed the financial performances of Air India, IndiGo and SpiceJet for this report.

Domestic air travel saw a strong rebound after the second Covid wave, with traffic reaching 86 per cent of the pre-Covid level in December. However, the third wave—led by the Omicron variant — has already caused domestic air traffic to plummet 25 per cent in the first week of January. A similar trend was observed during the second wave in April and May 2021 when air traffic declined 25 per cent and 66 per cent, respectively, on a sequential basis.

“The three large airlines have already reported a net loss of Rs 11,323 crore in the first half of FY22. The sharp jump in domestic air traffic would have cushioned the losses in the third quarter, but the net loss will increase significantly in the fourth quarter as the third wave has brought back travel restrictions and flight cancellations. As a result, we expect Airlines to report steepest net loss this fiscal,” said Nitesh Jain, Director, CRISIL Ratings.

Besides the decline in passenger traffic, high ATF prices which account for a third of the operating cost, will accentuate pressure on profitability.

ATF prices had hit an all-time high of Rs 83 per litre in November 2021, rising from an average of Rs 44 in FY21 and Rs 63 in April-June 2021. While ATF prices declined 6-8 per cent in December 2021 and January 2022 because of reduction in value-added tax by various states, they remain high at Rs 77-78 per litre.