Moneycontrol PRO
Upcoming Event:Join us for the exciting discussion with Danone on role of nutrition, protein in working professionals’ quality of life on July 31, 3pm.
you are here: HomeNewsTrends

Domestic airlines' daily cash burn estimated at Rs 10-25 crore in Apr-Jun

Airlines have a high cash burn rate as they struggle to sustain operations with low passenger traffic and high fuel cost. This situation is likely to continue because air traffic is not expected to return to normal levels for a long time

June 15, 2021 / 04:14 PM IST
Source: Reuters

Source: Reuters

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.

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

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.
Yaruqhullah Khan
first published: Jun 15, 2021 04:14 pm

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark