The second wave of infections, which has brought the country’s healthcare system to its knees, could precipitate a collapse of domestic aviation sector, aviation consultancy firm Capa India said in a report on Monday.
This will also accelerate consolidation in the industry, resulting in two to three airlines operating in the domestic sector, down from six major airlines and three regional carriers that currently operate in the space, said the report titled ‘Key Trends in Indian Aviation in FY2022: Impact of Second Wave.’
“Most Indian airlines were already very vulnerable prior to the outbreak, with weak balance sheets and poor liquidity. Covid inflicted massive losses and led to an increasing debt burden on carriers that were structurally ill-equipped to absorb this impact,” it said.
“The extent of the challenge is reflected in the fact that Indian carriers under-recovered $70 per flyer in FY21,” the report said.
As things stand, fewer Indians took to the skies for the sixth week in a row for the week ending on 1 May, given the fresh surge in covid cases across the country.
The average number of daily flyers stood at 126,000 for the week ended 1 May, down from 152,000 for the week ended 24 April, and less than 193,000 in the week ended 17 April, as per a report by ICICI Securities.
The average passenger load factor (PLF), an airline industry metric that measures how much of an airline’s passenger carrying capacity is used, stood at 50% during the week ending on 1 May, the report showed.
The industry will report serious losses in FY2022, similar in scale to that in FY2021, with a downside risk in the event of a protracted second wave, or the emergence of a third wave, the report said. Many Indian airlines will struggle to recover from two consecutive years of such massive losses, it said.
“The severity of the wave will close the door for most aviation businesses in terms of access to lenders, in the absence of government intervention, which is unlikely,” the report said.
IndiGo will be the only carrier to emerge from the crisis significantly stronger because of its very strong balance sheet, the report said. “Consolidation is inevitable and will be strategic in nature. It could result in a 2-3 airline system in the near to medium term,” it said.