The loss is however expected to be 35-40% lower than the projected loss in FY21
Lower domestic air traffic compared with pre-pandemic levels, together with high fuel prices and only a gradual recovery in international operations would result in domestic airlines posting Rs 9,500-10,000 crore net loss in FY 2022, according to a Crisil analysis.
The loss is however expected to be 35-40 per cent lower than the projected loss in FY21, it said.
The second wave of Covid-19 pandemic has already resulted in slowdown in air traffic. Airlines are clubbing flights as booking volumes have slumped around 40 per cent. On Tuesday domestic air traffic fell to 183,331 (first time under 200,000 since last November). On Thursday the Mumbai airport announced consolidation of all operations at terminal 2 (T2) barely a month after shifting a few flights to T1. All domestic and international flights in Mumbai will now operate from T2 from April 21.
A resurgence of Covid-19 infections across the country — especially in Mumbai and Delhi, which account for 36 per cent of overall air traffic – is expected to stall the recovery seen over the past six months. In fact, average daily domestic passenger air traffic fell in April by over 15 per cent to around 235,000 compared to February.
“Domestic traffic fell 85 per cent in the first half of last fiscal due to lockdowns and restrictions on operations. Despite the second wave-induced fresh curbs, which will temper recovery, domestic traffic in the first half of this fiscal is likely to be 3.5-4 times higher on-year, on a low base. The second half should see good recovery in traffic, supported by acceleration in the vaccination drive and people gradually taking to travel after prolonged stay at home,” said Gautam Shahi, director of Crisil Ratings.
A gradual recovery in international operations in the second half of fiscal 2022 will also boost traffic. However, airlines have also seen their cost of operations spurt due to a rise in the price of aviation turbine fuel (ATF), a key cost head for them. The price, which remained low until November 2020, limiting their losses, has shot up 30 per cent since then. This will offset the benefits from some of the initiatives the carriers undertook to reduce cost – employee costs, rentals, etc. – last fiscal, and which are being carried forward into the current fiscal.
Fluctuations in crude oil price, foreign exchange rates, prolonged impact of the second wave on domestic traffic volume, and the pace of recovery in international travel, which is more lucrative, will be key monitorables, Crisil said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.