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Domestic airlines may post higher losses at $1.65-1.90 bn this fiscal: CAPA

The airlines may lose money in the current fiscal largely because of their uncompetitive cost base on domestic operations and a lack of profitability on international routes, the report said

Press Trust of India  |  Mumbai 

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The industry is expected to post higher losses at $1.65-1.90 billion this fiscal year, up from projected $430-460 million, amid the headwinds due to higher costs and lower yields, a report said.

Besides, airlines need to raise over $3 billion in near-term based on June quarter estimates, with full service carriers requiring around $2.6 billion, while the low-cost peers needing $400 million, the India unit of Sydney-based Centre for Asia Pacific (CAPA) Monday said in its Mid-Year Outlook 2019.

Full service carriers are critically placed and could lose $1.75-2 billion in the current fiscal largely because of their uncompetitive cost base on domestic operations and a lack of profitability on international routes, it said.

Government-owned Air India, Jet Airways and Vfull-servicehe three full service

Stating that traffic growth continues unabated but the financial outlook has deteriorated dramatically since January, the report said, "At that time (since January) India forecast a consolidated industry loss of $430-460 million, subject to oil remaining below USD 70/barrel and the US dollar exchange rate at Rs 65-67."

"Our revised forecast is for an industry loss of $1.65-1.90 billion in FY2019. These projections assume oil at $75-80/barrel and the exchange rate at Rs 70-72," it added.

estimates that though three budget carriers' - IndiGo, GoAir and SpiceJet - full-year result is likely to range between break-even modest profitability, the possibility of a full-year loss can't be ruled out.

Observing that the industry is facing headwinds, but not a downward cycle as economic fundamentals are strong, India said despite the challenges faced by the sector, the wider macro-economic conditions remain strong.

"With airlines offering low fares, demand for travel will be stimulated. As a result, the domestic traffic is expected to grow at 18-20 per cent this year, and international at 10-12 per cent, consistent with the forecast in January.

"We do not see this as a downward cycle at this stage. The trigger for that would be sustained oil prices above $80/barrel and the exchange rate remaining at Rs 70-72," it said.

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India had registered double-digit domestic air passenger traffic growth for the 48th straight month in July at 20.82 per cent.

According to CAPA, the near-terms risks and losses are expected to increase until the industry adjusts to the new normal.

First Published: Mon, September 03 2018. 21:20 IST
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