Amid global headwinds, Indian airlines will continue to post losses. Aviation consultancy firm CAPA India has revised its estimate for airlines’ losses for FY23. In its previous report, CAPA had estimated a cumulative loss of $1.4-1.7 billion; however, now it has raised the estimates to $2.5 billion.

No-frills carriers including IndiGo, SpiceJet and GoFirst are likely to post losses of around $0.9-1 billion and full-service carriers including Vistara and Air India may post losses to the tune of over $1.5 billion, CAPA said in its mid-year outlook. Its estimates have stated that Indian airlines will have lost around $10 billion across FY21, FY22 and FY23.

Hostile environment

Explaining the current scenario, CAPA stated that the cost environment remains hostile in India. Fuel, currency, labour, airport charges and aircraft ownership costs (due to a combination of inflation and currency depreciation) are all increasing. Along with this, rising interest rates are also expected to start reflecting in aircraft ownership costs. Overall, the cost base will remain a structural risk in near to medium term.

If this was not enough, more than 75 aircraft are currently grounded, creating serious challenges against the backdrop of an already hostile cost environment and contributing to increased losses of over 10-12 per cent of Indian fleet due to maintenance or engine-related issues. These will have a significant impact on financials in the second half.

Challenging times

In this light, “The next 12 months will remain extremely challenging due to geopolitical tension and emergence of recessionary conditions in several leading economies, supply chain issues and labour shortages, particularly in the West,” CAPA India said.

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