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Akasa, Jet Airways 2.0 may add to the woes of Indian aviation industry: HSBC Global Research

While IndiGo is expected to report a Rs 310 crore loss, SpiceJet is expected to report losses to the tune of Rs 170 crore during the recently concluded quarter.

January 14, 2022 / 07:35 PM IST
In its report titled 'Indian Aviation, 2022: A year of two halves', HSBC Global Research said that while the aviation sector might see a recovery in demand in April-June 2022, optimism around the sector will be short-lived as new players plan to start operations from July.

In its report titled 'Indian Aviation, 2022: A year of two halves', HSBC Global Research said that while the aviation sector might see a recovery in demand in April-June 2022, optimism around the sector will be short-lived as new players plan to start operations from July.

The struggles of the Indian aviation industry are unlikely to ease in the coming few years, according to HSBC Global Research. The research house expects the entry of two new carriers, Akasa and Jet Airways 2.0, to weaken the health of the domestic airlines due to upcoming expected fare wars and excess supply in the Indian market.

In its report titled 'Indian Aviation, 2022: A year of two halves', HSBC Global Research said that while the aviation sector might see a recovery in demand in April-June 2022, optimism around the sector will be short-lived as new players plan to start operations from July.

"Amidst all these challenges, investors are concerned about the yield outlook.... we think the fare war could be an obvious outcome of excess supply in the market. On our calculation, the industry could add 80-85 aircraft this year which could increase the gap between demand and supply, adding pressure on the load factor and yield," the research house said.

Furthermore, it expects InterGlobe Aviation-operated IndiGo and SpiceJet to report steep losses during the December quarter.

While IndiGo is expected to report a Rs 310 crore loss, SpiceJet is expected to report losses to the tune of Rs 170 crore during the recently concluded quarter.

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The HSBC report, however, stated that there is optimism about a quicker recovery from the ongoing wave due to countries in Europe and Africa recording peak levels of infections for a shorter period of time amidst milder impact than the previous waves.

"Although demand in both the previous Covid-19 waves took around 8-9 months to get back to about 80% of pre-Covid-19 levels, the peak levels of infections in the UK and South Africa this time were acute and brief but with a very mild impact, so the mood regarding travel is still fairly optimistic in Europe," HSBC said in its report.

The report added that international demand recovery could take much longer as many countries, especially the ones including major economies, implement travel restrictions to contain the spread of the virus.
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