Indian airlines are likely to need an additional funding of ₹45,000–47,000 crore from FY2022 to FY2024, according to credit rating agency ICRA. On the other hand, Indian airports are likely to double their capex to ₹42,000 crore by FY26, according to CRISIL.

Global aviation has been hit by the Covid-19 pandemic, and the hike in jet fuel prices and fare caps have been a double whammy.

Almost all airlines are looking for ways to raise funds. IndiGo and SpiceJet are raising ₹3,000 crore via qualified institutional placements (QIPs) and ₹2,500 crore via qualified institutional buyers (QIBs), while Vistara has received about ₹1,000 crore from its parent companies Tata Sons and Singapore Airlines. GoFirst, too, recently received SEBI clearance for its ₹3,000 crore IPO.

Is the aviation market ready for new players?

ICRA said that given the turmoil in the industry, Indian airlines are likely to post a cumulative loss of about ₹26,000 crore in FY2022.

Kinjal Shah, Vice-President and Co-Group Head, ICRA, explained that passenger traffic recovery will be gradual, with domestic traffic likely to return to pre-Covid levels by FY2024. Elevated prices of jet fuel, which are 71 per cent higher on year-on-year basis in the first five months of FY2022, and fare caps pose a challenge for the profitability of airlines.

“The debt levels will remain high for the industry and are estimated to increase to around ₹1.2 lakh crore (including lease liabilities) in FY2022, with the industry requiring an additional funding of ₹45,000–47,000 crore over FY2022 to FY2024.”

Readying the runways

Meanwhile, the Civil Aviation ministry is trying to get airports up and ready. There has been a change of hands for the Mumbai and Navi Mumbai airports recently. Several other airports have been handed over under the PPP (public-private participation) model. Delhi Airport got its fourth runway and Bengaluru airport too is expanding.

Time ripe for Akasa and Jet Airways to take to the skies

According to CRISIL’s analysis, before the onset of Covid-19 in India, towards the end of fiscal 2020, private airports were bursting at the seams, operating at over 115 per cent of their capacity (that is, about 175 million passengers compared with their capacity for 150 million).

“The high operating rate was due to strong annual growth of over 8 per cent in air traffic between fiscals 2016 and 2020. The operating rates took a massive hit in fiscal 2021 as the pandemic and the subsequent economic slowdown led to traffic nosediving by about 65 per cent,” it said.

While the outlook is bleak in the short term, the confidence stems from the strong long-term fundamentals and regulated tariff structure, which allows pass-through of capex costs to keep the risks low, it explained.

CRISIL believes that private airport operators will spend around ₹42,000 crore on capacity expansion until fiscal 2026. “That’s more than double the capital expenditure (capex) they incurred in the previous five fiscals,” the company said.

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