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AirAsia India hikes borrowing limit by ₹1,000 cr to maintain its fleet

K Giriprakash Bengaluru | Updated on April 27, 2020 Published on April 27, 2020

With hopes of getting a bailout package for the airline industry diminishing, AirAsia India has increased its borrowing limit by ₹1,000 crore to ensure it continues to pay leasing and parking charges for its grounded aircraft.

AirAsia India is learnt to be the first domestic airline to formally increase the borrowing limit. The decision to increase the limit from ₹500 crore to ₹1,500 crore was taken at a recent meeting of the shareholders. AirAsia India is a joint venture between Tata Sons, which owns 51 per cent in the airline, and AirAsia Berhad. The special resolution was approved to carry out “existing and future financial requirements to support its business operations”, according to to data intelligence platform paper.vc.

Following the lockdown, all domestic and international flights have been cancelled. According to CAPA, an aviation consultancy firm, domestic airlines are set to incur losses worth $1.75 billion in the first quarter of the current financial year.

According to various reports, some lessors are in contact with domestic airlines to terminate the contracts and take back the leased aircraft following missed payments. AirAsia has 30 aircraft on lease, with 70 more on order.

According to the Q4 results (Oct-Dec, 2019), the airline’s maintenance and overhaul charges were ₹174.35 crore.,

Leasing charges for the same period during 2018 ₹116.4 crore in Q4 of the previous year.. No details have been given with regard to leasing charges for Q4 of 2019.

AirAsia India recorded fourth quarter net loss of ₹123.3 crore in FY19, which was 26 per cent lesser than the same quarter in the previous year. It recorded revenues of ₹1,057.6 crore, a 65 per cent increase from Q4 of FY18 on the back of a 38 per cent increase in capacity and a 19 per cent increase in average fare. Staff costs increased by 77 per cent due to additional operational staff for an increased number of aircraft and also forward hiring to cater to the additional aircraft to be inducted in the first half of 2020.

The 4Q19 share of results of AirAsia Berhad includes Rs 233.2 crore recognized for AirAsia India losses on injection of investment into AirAsia India.

The domestic airlines are facing huge challenges in view of the coronavirus pandemic and according to various analysts, except for a couple of airlines, the rest will find it hard to sustain their operations for long. According to data intelligence company, Cirium, SpiceJet is expected to incur $20 million in charges every month for its 100 leased aircraft.

Industry body FICCI, has urged the government to offer financial relief to the airline sector. In a letter to the Minister of State for Civil Aviation, FICCI has sought tax relief, deferment of GST payment, bringing jet fuel under GST, lowering of airport charges, a temporary cut in excise duty on jet fuel, among others. The airline industry in India employs about 1 million people directly and indirectly while the auto industry in the country employs about 20 million.

According to another CAPA report, for India to return to the pre-Covid-19 operational fleet of 650 aircraft, it is likely to take up 12 months after the flights are allowed to resume services. According to the current estimates, the domestic airline industry will end up with a surplus of 200-250 aircraft over the next 6-12 months which would mean an additional financial burden on the airlines.

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Published on April 27, 2020
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