Dark clouds for the Indian aviation industry will continue to hover around for around next four years, according to ICRA.

In a mid-yearly analysis, the credit rating agency said the domestic aviation industry will need approximately ₹35,000 crore of equity infusion through turbulent times ahead.

Kinjal Shah, Vice-President and Co-Head, Corporate Sector Ratings, ICRA, “Listed airlines like SpiceJet, Jet Airways and Indigo have reported a combined net loss of ₹3,640 crore in H1 FY2019 and together have lost ₹20 crore per day during H1 FY2019.”

Since the beginning of this fiscal, the industry has seen a surge in fuel costup to 35 per cent from same time last year and deprecation of the rupee value to 7.8 per cent during the same period. This has led to most of the domestic airlines incurring losses during the fiscal.

Speaking to BusinessLine, Santosh Hiredesai, Research Analyst with SBI Caps Securities, said on an average, the airlines add 20 per cent more capacity of aircraft to their fleet every year which inevitably leads to higher spends on crew, fuel, airport costs among other things. To cover the basic cost and gain profits, the airlines must fill up the seats even if the prices are regularised at the level which the customer is willing to pay. This does not seem to be happening at the moment leading to losses, he said.

Speaking about the lack of airport infrastructure, Peeyush Naidu, Partner, Deloitte, said “While on one hand a number of airports in metro cities/State capitals have already hit traffic saturation levels, the increase in capacity through further airport infrastructure development is likely to take time on account of land availability, procurement issues. This sector is ripe for investment by private players / investors, which, in turn, will boost growth prospects for airlines — especially given the fleets on order.”

In order to contain further losses, the domestic airlines have resorted to several measures, which include among others, rationalisation of non-fuel costs, network review, routes, and manpower. Hiredesai added that if airlines reduce their fleet addition to 8-10 per cent instead of 20 per cent, prices could go higher leading to profitability.

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