The menacing second wave of the COVID-19 and costly fuel have delivered a severe blow to domestic airlines as passenger traffic has nosedived and costs have risen.
Passenger traffic in the Apr-June quarter is down 60 percent in the domestic sector, leading to a daily cash burn of about Rs 10-25 crore during the period, multiple market experts, brokerages and rating agencies said.
“The fall in passenger traffic coupled with rising fuel costs, and other expenses due to COVID protocols, in my estimate, will lead to IndiGo reporting a nearly Rs 25 crore of daily cash-burn," a market expert from one of the big four accounting firms told Moneycontrol.
In February, IndiGo saw close to 80% of pre-pandemic traffic, but this changed drastically with the second wave of the pandemic, which led to steep rise in infections. This led to 27% sequential rise in daily cash burn to Rs 19 crore in the Jan-Mar quarter.
The market expert said that daily cash burn was about Rs 16 crore for SpiceJet, Rs 13.5 crore for Air India, Rs 6 crore for GoAir and Rs 2.6 crore for Vistara.
Crisil Rating expects domestic airlines to report a Rs 900 crore loss in revenues in 2021-22 (Apr-Mar), from its earlier expectation of Rs 7,500 crores of revenue in fiscal 2022.
Furthermore, as domestic passenger traffic is expected to recover to the levels of February by Oct-Dec and to the pre-pandemic levels by 2022-23 (Apr-Mar) cash burns are expected to continue going forward.
In order to tide over the rise in costs, domestic airlines are looking to raise funds, and this is expected to put a strain on the balance sheet of airlines.
IndiGo is already looking to raise about Rs 4,500 crore and said it plans to raise another Rs 3,000 crore from qualified institutional placement.
Airlines may also be forced to cut staff, stop operations on some routes, and even delay capital expenditure plans in case passenger air traffic does not recover by the end of 2021-22, market experts said.
Reports have surfaced of IndiGo resorting to a leave-without-pay policy for its employees following the difficult second wave of COVID-19 in India.
According to reports, the airline's staff will have to take anywhere between 1.5 to 4 days off every month, resulting in cuts of 5% to 13% for three months.