Listed airlines need ₹35,000 cr. capital in four years: ICRA

Jet, Indigo, SpiceJet see ₹20-cr. loss a day in first half of FY19

NEW DELHI, 16/04/2012: An Indigo aircraft prepare for takeoff at the IGI airport in New Delhi, despite the turbulence in the Indian aviation space is taking a toll even on the only profitable carrier that India can boast of is Indigo, they dismissed allegations that Indigo's profits were a result of sale and leasebacks adding that the airline had nothing to hide and its profits were open to any kind of scrutiny, in New Delhi. Photo: V.V. Krishnan

With three listed airlines — Jet Airways (India), SpiceJet and Interglobe Aviation Ltd. (IndiGo) — suffering a combined loss of ₹20 crore per day in the first half of this fiscal, revenue enhancement and cost reduction measures seem to have little impact on their finances, rating agency ICRA said in a report.

Domestic airlines will need capital infusion of ₹35,000 crore in the next 3-4 years to stay afloat, the report said.

The twin blows of significant increase in aviation turbine fuel prices and the depreciation of the rupee against the dollar has been compounded with the industry’s inability to raise fares to recover the costs.

“The industry’s financial health has nosedived, with the three listed airlines having reported a combined net loss of ₹3,640 crore in H1 FY2019. That means the three listed airlines together have lost ₹20 crore a day in the same period,” said Kinjal Shah, VP and co-head, Corporate Sector Ratings, ICRA.

Declining yields

Yields have declined for most airlines.

“This is due to the price sensitive nature of the industry, which is plagued by rising capacities, with the sector likely to have significant over-capacity in two-three years,” it said.

Air Carnival, Air Costa, Air Pegasus, Zoom Air have suspended operations in the past two years due to financial stress.

Airlines have resorted to rationalisation of non-fuel costs, network review, rationalisation of routes, and manpower reduction to lower costs, the report noted.

Some are also inducting fuel efficient aircraft in their fleet to be efficient but “these measures are not adequate to compensate the large hike in ATF prices and the increase in costs due to the rupee depreciation,” ICRA said.

“The overall debt levels in the industry remain high and would require equity infusion to bring the same to reasonable levels. ICRA believes an equity infusion of ₹35,000 crore would be needed over the next 3-4 years,” Ms. Shah said.

“In the near-term, the balance sheets of Indian carriers are expected to continue to remain stressed until carriers are able to reduce their debt burden through a combination of improvement in operating performance and / or by way of equity infusion,” she added.