Indian carriers are expected to post a record loss of over Rs 20,000 crore this fiscal due to the third wave of the Covid-19 pandemic and higher aviation turbine fuel price, rating agency Crisil said today.
The FY22 loss would be 44 per cent higher than the Rs 13,853 crore loss reported last year, it added. Crisil analysed financial performance of Air India, IndiGo and SpiceJet for this report.
Domestic air travel has seen a strong rebound after the second wave of pandemic and traffic reached 86 per cent of the pre-Covid level in December. However, the third wave has already caused domestic air traffic to plummet 25 per cent in the first week of January. A similar trend was observed during the second wave in April and May 2021 when air traffic declined 25 per cent and 66 per cent respectively, on a sequential basis.
“The three large airlines have already reported a net loss of Rs 11,323 crore in the first half of fiscal 2022. The sharp jump in domestic air traffic would have cushioned the losses in the third quarter, but the net loss will increase significantly in the fourth quarter as the third wave has brought back travel restrictions and flight cancellations. As a result, we expect Airlines to report
steepest net loss this fiscal,” said Nitesh Jain, Director, Crisil Ratings.
Besides the decline in passenger traffic, high ATF prices which account for a third of the operating cost, will accentuate pressure on profitability.
ATF prices had hit an all-time high of Rs 83 per litre in November 2021, rising from and average price of Rs 44 in fiscal 2021 and about Rs 63 in April-June 2021. While ATF prices declined 6-8 per cent in December 2021 and January 2022 because of reduction in value-added tax by various states, they remain high at Rs 77-78 per litre.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU