Covid-19 outbreak to intensify cash flow pressure on airlines: Ind-Ra

Our Bureau Mumbai | Updated on March 20, 2020

The India Ratings and Research (Ind-Ra) believes that the Covid-19 outbreak would intensify the pressure on airline operators’ cash flows over the near term, as passengers refrain from both domestic and international travel.

In case the outbreak is not contained, social distancing measures could aggravate the impact on airlines’ passenger load factor (PLF) over a prolonged period of time. Even if the outbreak is contained within the next three months, it could take a while before air travel returns to normalcy, Ind-Ra said in a media statement.

Although air turbine fuel prices have reduced, the combined impact of a lower PLF and downward pressure on air fares will keep the credit metrics under stress. The agency expects the three low-cost carriers to require additional funding of about INR35 billion even if the outbreak is contained in the next three months (favourable case) and ₹145 billion if the outbreak persists for in the next 12 months (stress case), to bridge the gap between their operating cash flows and contractual payments, the statement said.

Published on March 20, 2020

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