in the grip of the third wave of COVID-19 A report has warned that due to the pandemic and rising fuel prices, airlines are heading towards record losses, with a potential loss of Rs 20,000 crore for the entire financial year.
CRISIL said in a report that the airlines are inching towards their biggest ever net loss of over Rs 20,000 crore this fiscal, which will be 44% higher than the Rs 13,853 crore made in the previous fiscal.
This will push back the recovery of the industry beyond FY2023, the report based on the three big listed airlines – IndiGo, SpiceJet and Air India – which together account for 75% of domestic traffic, warned.
Air traffic had improved sharply after the second wave and reached 86% of pre-pandemic levels in December 2021 compared to December 2019, while regular international flights were expected to start after January 2022.
However, the third wave has already registered a 25% drop in domestic air traffic in the first week of January. A similar trend was also observed during the second wave in April-May 2021, when air traffic declined by 25% and 66%, respectively, on a sequential basis, the report said.
According to agency director Nitesh Jain, the three big listed airlines have already reported a net loss of ₹11,323 crore in the first half of the current financial year. A sharp jump in domestic air traffic would have offset losses in the third quarter, but net losses in the fourth quarter would widen as the third wave triggered travel restrictions and flight cancellations. As a result, airlines are expected to post the highest net loss this fiscal.
Passenger load factor, a key operating metric, has increased from 50% in May 2021 to 80% in December 2021. Although seat utilization levels have improved, it was still significantly lower at 88–90% than pre-pandemic times, causing recurring losses and continuing suspension of scheduled international flights causing further damage to the sector as international routes are generally more profitable.
In addition to declining traffic, higher fuel prices – which account for a third of operating costs – are putting pressure on profitability.
Aviation turbine fuel prices hit an all-time high of Rs 83 per liter in November 2021, rising from an average price of Rs 44 in FY21 and Rs 63 in April-June 2021. Whereas in December 2021, the prices had dropped by 6-8%. They remain high even after oil companies on Sunday, due to reduction in value-added tax by various states hiked atf prices 4.2% to ₹79.3 per liter in the national capital.
Rakshit Kachal, an associate director of the agency, said debt has increased by 35% due to persistent operating losses, excluding lease liabilities, above ₹54,000 crore for the industry from March 2020 to September 2021 and maintaining a sustained net loss balance Will keep The negative outlook on the industry has drawn the sheets.
Although third wave air traffic will be severely affected in the next few weeks, the report expects a rapid recovery from March. During this time airlines are likely to continue to conserve cash, which includes maintenance as well as major capital expenditures, while negotiating aircraft leases and leasing at other fixed costs.
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