Industry

Aviation firms may suffer losses of up to $3.6 bn: CAPA

‘First quarter of FY21 already looks like a washout‘

Indian aviation companies, including airlines, airport operators and related services, are estimated to incur a loss of $3.3 billion to $3.6 billion (₹24,750 crore to ₹27,000 crore) in the April to June 2020 quarter on account of COVID-19 spread in India and the resultant lockdown, aviation consulting firm CAPA Advisory has said.

As per CAPA India preliminary estimates, while airlines will incur a loss of $1.75 billion in first quarter of the 2021 fiscal, airport and concessionaires will see a loss of $1.50-1.75 billion and ground handlers $80-90 million.

“India’s airline system is certainly not prepared for such a severe systemic shock, and this will have an impact on the entire aviation value chain, including airport operators, duty free, retail, food and beverage, and other airport concessionaires; ground handlers; MROs, inflight catering companies, not to mention travel distribution,” said Kapil Kaul, CEO and Director, CAPA Advisory. “The entire sector is now in a state of crisis which will certainly impact FY2021 and quite possibly well beyond,” he said.

“India’s aviation sector could incur losses of $3.3-3.6 billion in Q1 of FY2021,” CAPA said, adding that this preliminary estimate assumes that all domestic and international operations remain grounded till June 30, 2020.

“Even with some partial resumption of services in May and June, the financial outcomes may not change significantly,” it said.

“The shutdown of aviation until at least April 15 means that Q1 of FY2021 is looking increasingly like a washout,” CAPA Advisory said in a report.

The groundings in the April-June quarter, traditionally one of the stronger quarters of the year, will have consequent implications for Q2 (usually the weakest quarter) and for the rest of FY2021, it said.

The severity of the impact could possibly lead to a structural reset of the airline sector in India, with a strategic shift in terms of traffic growth, fleet expansion, pricing, costs and business models, the firm added.

“Although it is too early to come to a firm conclusion, what emerges on the other side may be a smaller, consolidated industry,” it said.

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Printable version | Apr 5, 2020 10:39:31 AM | https://www.thehindu.com/business/Industry/aviation-firms-may-suffer-losses-of-up-to-36-bn-capa/article31166862.ece

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