Aviation consultancy firm Capa India said Indian airlines expect a loss of $3.5-4 billion in this financial year, excluding any adjustments. To address these deficits, carriers will need a steady inflow of capital, including $1 billion in funds, during the October-March period, Capa said in its mid-year outlook for fiscal 2012.
According to Capa, domestic air passenger traffic is expected to remain strong till December, but may face some uncertainty during January to March next year. Capa said daily domestic traffic is expected to stabilize at 350,000-375,000 passengers in the four months leading up to March.
The consultancy firm said that despite the revival of air passenger traffic, high fuel costs continue to be a concern for airlines and are also likely to prevent airlines from reporting breakeven or profit during the December quarter.
Capa said it expects 80-95 million domestic passengers and 16-21 million international passengers during FY22.
As per CAPA estimates, airlines like SpiceJet Ltd will need funding of up to $400 million to continue their operations.
“SLB (aircraft sale and leaseback) will contribute $300-400 million (for SpiceJet) in FY2023/24. But, relying on Boeing compensation and SLB alone would be risky.”
Under an SLB transaction, an owner sells the aircraft and then leases it back to the buyer, thus making a profit. Such a deal usually removes the aircraft and associated debt from the carrier’s balance sheet.
Capa said airlines like GoFirst will seek to raise $450 million through a planned public listing, while Tata Group-run Vistara and AirAsia India may need additional capital.
IndiGo, operated by InterGlobe Aviation Ltd, may need to conduct a qualified institutional placement in the next financial year to raise funds, Capa said.
The acquisition of Air India Ltd by the Tata group and the entry of two new players—Akasa and Jet Airways 2.0—will impact airlines, especially domestic market leader IndiGo, Capa said, as a result of airlines scrambling to hire talent. Because the industry has to face one. Shortage of 50-70 senior/mid level managers.
“(We) expect to see renewal of senior executives/leadership in airlines. A new management order is likely post-Covid,” Capa said. “Some carriers may need to strengthen their management teams in the works, (while) others may need to change,” it added. .
Meanwhile, the launch of billionaire investor Rakesh Jhunjhunwala-backed ultra-low-cost carrier Akasa is expected to disrupt the market from FY25 after the airline gained scale and a competitive cost base.
“(Akasa) is viewed as a major emerging player based on financial strength and recruitment strategy,” Capa said in the report.
However, consolidation in the aviation sector is unlikely this fiscal, it said, adding that the risk for consolidation would remain during FY23-24.
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