The entry of new airlines is expected to put additional financial stress on incumbent carriers
The Indian airline industry has landed itself in dire straits due to mounting losses, and three airlines are expected to report a combined full year net loss of $1.2 billion, according to aviation consultancy Centre for Asia Pacific Aviation (CAPA).
This includes a loss of $700 million by Air India (AI). Earlier, CAPA had estimated full year loss of $750-800 million for AI.
“AI is once again expected to incur the largest loss… although this represents an improvement of 20 per cent year-on-year in local currency terms. Jet Airways and SpiceJet are likely to report record losses,” CAPA said in its Indian Aviation Outlook for FY2015.
It said GoAir would end the year with a break-even. IndiGo will report significantly lower than expected net profit.
In seven years till March 31, 2013, the airline industry reported total accumulated losses of $8.6 billion, and the industry’s debt had climbed to $12.6 billion, it said.
The entry of new airlines this year was expected to put additional financial stress on incumbent carriers, CAPA said.
According to CAPA’s estimates, airlines would need capital infusion of $1.6 billion in 12-18 months to continue operations out of which Air India would need $1 billion. In the Interim Budget, the Union Finance Minister has allocated nearly $900 million as equity infusion into AI.
Since AI would require more cash to stay airborne, CAPA felt that the new government might think of privatising the airline as its fund requirement had exceeded earlier commitment by the government.
However, serious investors would stay away in the absence of a structured and predictable framework.
Agreeing with CAPA estimates and outlook, Air Deccan founder Captain G.R. Gopinath said flawed government policies had largely contributed to these losses. “All sectors in India are flourishing, why not the airline industry? Airlines are suffering partly due to their internal problems but government policies are mostly to be blamed. Exorbitant airport fees are bleeding airlines, and the government owns all airports. We need long-term plan for the sector, not airline-specific plans to bail out individual carriers.” Captain Gopinath told The Hindu.