Some airlines can shutdown in India due to lack of money if the govt doesn’t intervene, aviation consultancy firm Centre for Asia Pacific Aviation (CAPA) has warned.
The situation is worrisome as Indian carriers saw a 12-15 percent dip in yields during the first fortnight of March and this might fall by 25 percent or more in the near term, CAPA said in the first update on the impact of coronavirus on India aviation market. Forward bookings are down by over 30 percent too, indicating dark clouds for the Indian aviation industry.
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While airlines in India may initially ground 150 planes because of COVID-19 situation, they’ll be forced to ground the majority of their fleet by April if demand continues to decline, CAPA has said.
As per initial estimates, consolidated losses for all airlines in India, except Air India, in Q1 are expected at $500-600 million but this is often sure to be revised downwards later.
The unprecedented lack of demand to travel because of travel advisories and visa restrictions over the spread of coronavirus has resulted in a shock which can be far deeper and far longer than what the world saw in 2008, CAPA added.
As most of the international sectors are already closed due to government advisories to stop the spread of deadly coronavirus, the International capacity of Indian airlines has fallen by 60-70 percent on the year and will approach a state of suspense.
“Airlines will seek to regulate aircraft deliveries scheduled for Q1 and will cancel some orders. Indian carriers have 50 aircraft due for induction between now and 30 June 2020. But delaying deliveries may impact the liquidity of some carriers that are reliant on sale-and-leaseback margins on aircraft inductions to get cash. and therefore the availability of financing for deliveries can also be compromised,” CAPA said.
The privatization drive of Air India may also be impacted due to the ongoing disruptive situation and the government may need to provide immediate interim funding of $300-400 million to keep the state airline running.
CAPA has suggested that the govt. should investigate bringing ATF under the GST regime, revise Jet fuel prices on a weekly basis, implement a short-term moratorium, extend credit terms for payments and banks may look at extending capital loans secured against future sales or sale-and- leaseback incentives.
“Regardless of any fiscal concessions and support that the govt may offer, most airlines will need to shrink their operations, and the more vulnerable carriers may shutdown,” CAPA reiterated.
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