New Delhi: The domestic aviation industry is expected to witness a strong Year-on-Year growth of 45-50% in domestic air passenger traffic and 80-85% in international air passenger traffic during FY2022, said credit rating agency ICRA on Tuesday.
However, the growth will still be significantly lower than even the FY2016 and FY2013 levels, respectively; and the industry is expected to report a higher net loss in FY2022, said ICRA.
Kinjal Shah, vice president and co-group head, ICRA Limited, said, "Given the resurgence of the second wave of the pandemic, the recovery in passenger traffic will only be gradual, with the domestic passenger traffic expected to reach pre-Covid levels only by FY2024. Elevated aviation turbine fuel (ATF) prices (higher by 71% on Y-o-Y basis in 5M FY2022) and fare caps continue to pose a challenge for the profitability of the airlines."
"Thus, the Indian aviation industry is expected to report a net loss of Rs 250-260 billion in FY2022. The debt levels will remain high for the industry and are estimated to increase to Rs 1200 billion (including lease liabilities) in FY2022, with industry requiring an additional funding of Rs 450-470 billion over FY2022 to FY2024," she added.
Civil Aviation Minister Jyotiraditya Scindia had on August 25 urged 22 states and union territories to reduce value-added tax (VAT) on ATF and bring it within the range of one to four per cent across all airports in order to give an impetus to air travel. Last week, Civil Aviation Ministry had held discussions on relaxing the cap on the number of flights and minimum and maximum fares that airlines charge in the domestic sector.
Also read: Scindia writes letter to states, UTs urging to rationalize VAT on ATF within range of 1-4 pc
As per the credit rating agency, recovery in the domestic air passenger traffic is contingent on five factors - pace of vaccination, willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, which in turn impacts consumer sentiments and the ability to travel, central and various state government-mandated travel restrictions and quarantine norms, and recovery in business travel.
In the near term, the balance sheets of Indian careers will remain stressed until the carriers are able to reduce their debt burden through a combination of improvement in operating performance and/or through equity infusion, ICRA said.
"ICRA had thus maintained its Negative credit outlook on the Indian aviation industry. Most airlines have initiated fund-raising plans to ride over the liquidity crisis stemming from the cash burn due to impact on demand and increase in ATF prices," it added.
