Domestic aviation industry will need up to Rs 35,000 cr addl funding in FY21-23: Icra

The domestic aviation industry, which has been impacted by coronavirus pandemic and subsequent lockdown, will require an additional funding worth Rs 32,500 to 35,000 crore during FY21-23, according to rating agency Icra.

It also said the industry-level debt is expected to increase to Rs 465 billion (around Rs 46,500 crore) over FY 2021-22.

At the same time, the industry is expected to report revenue de-growth of 44 per cent and a negative CAGR (compound annual growth rate) of 26 per cent in 2021-2023, Kinjal Shah, Vice President at Icra, said during a webinar on Thursday.

"Considering the daily net loss of Rs 75-Rs 90 crore during the shutdown of operations and the expected weak demand, the Indian aviation industry will require additional funding of Rs 325-350 billion (Rs 32,500 to 35,000 crore) over FY2021-23.

"The industry level debt is expected to increase to Rs 465 billion over FY 2021-22," Shah said.

In the forecast, Icra has included an aggregate of all the five private sector players -- IndiGo, SpiceJet, GoAir, Vistara and AirAsia India -- to make the balance sheet.

It may be mentioned here, that the disinvestment-bound Air India has parked nearly half of its total -- over Rs 60,000 crore -- debt into the SPV to make the heavily-leveraged balance sheet more attractive to the prospective buyers.

According to the rating agency, the aviation industry is expected to report a negative 44 per cent growth in revenue for FY21 owing to an estimated 0.7 per cent growth in the domestic passenger traffic in the wake of the coronavirus pandemic.

The profitability of the industry would also be adversely impacted in the ongoing fiscal due to lower revenues and high fixed costs, which is 35-42 per cent of the total cost of airlines.

According to Icra, the domestic traffic growth witnessed a seven-year low of 0.7 per cent in the previous fiscal, while the dip in the international traffic was much higher at a negative 13.5 per cent.

Stating that consumer sentiment is likely to be weak in adverse economic environment, Icra said, the recovery in air travel is expected to be gradual once COVID-19 threat is allayed.

Overall, the industry is expected to witness a 41-46 per cent de-growth in domestic passenger traffic and 67-72 per cent de-growth in international passenger traffic for the domestic airlines in FY2021, it said.