The Centre for Asia Pacific Aviation (CAPA) India feels that the total debt of Indian carriers is expected to reach around $20 billion by the end of the financial year, unless serious efforts are made to de-leverage their balance sheets.

About half of this debt is aircraft-acquisition related; the rest is working capital loans and trade creditors (such as airport operators and fuel companies).

The large three airline groups in particular need to reduce their net debt and boost liquidity as their cash positions remain low, it said.

The independent aviation market intelligence, analysis and data service provider in its aviation outlook (to be released next week) projects that India's private carriers will post a combined profit of $350-$400 million for the year ending March 31, 2012.

However, Air India is expected to remain in the red with losses in the range of $1 billion-1.25 billion, assuming an average oil price of $85-95 a barrel.

Orders

The positive direction of the industry in terms of traffic, yields and profitability, supported by strong long term fundamentals will lead to a resumption of fleet orders. In addition to IndiGo's recently announced plans to acquire 180 A320 aircraft, CAPA expects that India's carriers will place orders for up to 200 new aircraft this year with a list price of $11 billion-12 billion.

Capital

Industry expansion will see the airlines turn to capital markets to raise up to $1.5 billion (excluding infusion of funds into Air India by the Government) through a combination of equity instruments.

CAPA believes that there is “increasing probability” that the proposal to allow foreign airlines to acquire up to 25 per cent equity in Indian carriers will be approved shortly.

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