The Indian aviation industry could be staring at a loss of up to $3.6 billion in the first quarter of FY21 due to the slump in demand and the suspension of flights because of coronavirus.
The estimates by advisory firm CAPA India adds that airlines alone could incur a loss of $1.75 billion. The rest of the losses will be incurred by airports, MROs, ground handlers and catering companies.
"The April-June quarter, traditionally one of the stronger quarters of the year for Indian airlines, is increasingly looking like it will be a washout," CAPA India said in the report released on March 25.
"IndiGo’s hitherto enviable free cash reserves may almost be wiped out. Smaller carriers may exit," it said.
The firm added that Tata Sons, the holding company of the Group, may be compelled to operate just of the two airlines that it has stakes in - Vistara and AirAsia India.
"This may be the right time to rationalise its airline portfolio," said CAPA India.
The estimates come as airlines grounded their fleet and winded up operations, temporarily, to meet the March 25 deadline set by the government to suspend domestic flights. It followed a series of similar travel restrictions to limit the spread of coronavirus, which has claimed nine lives in India, and over 500 have been reported to be infected.
On March 24, Prime Minister Narendra Modi announced a national lockdown, which will continue till April 14.
In its first report on the impact coronavirus could have on the domestic aviation industry, CAPA India had said that the industry may lose up to $600 million in the first three months of the year, and that up. to 50 percent of the jobs could go redundant.
The second report is more damning on the prospects of the sector.
"If the first quarter is subject to continued and extensive disruption, with a rolling impact on the remainder of the year, it is possible that both domestic and international traffic could decline by 30-50% year-on-year in FY2021," it said.
The advisory firm, however, cautioned that "this is very much an indicative figure only, in what is a highly uncertain and fast-moving environment and should not be considered a projection."
It has suggested a three-phase support for airlines - cash infusion to meet urgent expenses; incentives like moratorium on outstanding payments and waiving charges; and recovery mechanism including easier credit lines."If the government is able to provide swift and meaningful assistance, it will also be incumbent upon the promoters of private carriers to play their part and collaborate by bringing in additional funds," CAPA India said.
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