Indian Airlines Will Lose $8 Billion Due to Covid, CAPA Says

An Air India Ltd. aircraft stands among other aircraft on the tarmac at an airport in New Delhi. (Photographer: T. Narayan/Bloomberg)

Indian Airlines Will Lose $8 Billion Due to Covid, CAPA Says

Indian carriers are expected to incur a loss of $8 billion by 2022 as the second Covid-19 wave puts any travel recovery on hold.

IndiGo, India’s largest airline, and Air India Ltd. will account for $4.5 billion of losses, CAPA Centre for Aviation said in its report India Airline Outlook for the fiscal year 2022 Thursday. Indian carriers will need about $5 billion to survive but have access to only about $1.1 billion funds through initial public offerings, sale of new shares and other instruments, it said.

India’s spike in infections has paralyzed the country’s air travel industry, which had begun to show signs of recovery, particularly in domestic routes. SpiceJet Ltd., India’s second-largest carrier, has reverted to paying employees based on work hours and deferred salaries for May. IndiGo is planning to raise 30 billion rupees ($411 million) by selling shares after being hit by the second wave.

“We have run out of words to describe the state of Indian airlines.” CAPA said in the report. “But as we have repeatedly emphasised, the industry is standing on the edge of a cliff. This is true even for airlines with access to large pools of capital.”

CAPA is expecting domestic traffic will drop to 80 million passengers from 140 million in 2020 and a moderate recovery will begin in June with an acceleration in traffic from the second quarter of the financial year ending March. Domestic travel demand will be “far more positive” in the second half of the year due to easing of restrictions and expansion of bubble agreements along with carriers’ increasing international capacity. However, international travel, which will see a traffic of 16 million passengers, will remain constrained by border restrictions.

CAPA has also called upon the government to relax the terms of Air India’s sale considering the second wave will increase the liabilities of the indebted state-run carrier to $20 billion. The short-listed bidders will find it difficult to prepare a bid in the current challenging environment.

It’s “not certain at this stage whether the privatisation will succeed unless changes are made to the offer,” CAPA said in the report. “We believe that the Government of India must have a Plan B for Air India in place now, which can be immediately operationalised if required.”

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