Indian Airlines likely to incur heavy revenue loss in next 3 years: CRISIL

In its latest report, CRISIL Research observes that Indian Airlines may face massive revenue loss due to the ongoing Coronavirus pandemic.

The aviation industry across the world has faced severe losses due to visa and travel restrictions and the case of Indian Airlines is no different. Thus, CRISIL is of the view that Indian Airlines may face losses between Rs 1.1 lakh crore and Rs 1.3 lakh crore over the next three financial years, including the current fiscal year (FY21).

Adding to this, it said that the airlines are unlikely to recover this loss as growth is not expected to return to pre-pandemic levels of double-digit increase at least until the medium term.

CRISIL report further stated that one might have assumed that the expected plunge in crude oil prices to US$ 38-42 per barrel in the fiscal year 2021, as compared to US$ 64-66 per barrel in the fiscal year 2020, could have helped airline companies to an extent on the marginal front as it forms a sizeable 30-45 per cent of airline's cost base. However, contrary to this, airlines are curtailing capacity deployment and restricting opportunities to accrue the benefit of low crude oil prices as a result of the outsized impact of demand destruction.

As per the report, airlines are projected to post losses at EBITDAR as well as EBITDA levels in the fiscal year 2021 as fixed costs, such as lease rentals, employee expenses and maintenance tasks, need to be met even when the airplanes are grounded.

The travelling restriction imposed to curb the spread of Coronavirus will further result in nearly 40 per cent to 45 per cent fall in the domestic air passenger traffic and 60 per cent to 65 per cent contraction in international traffic in the ongoing fiscal year. It also believes that with the COVID-19 pandemic still raging worldwide, a revival to pre-pandemic levels appears unlikely even in the next fiscal year.