Covid, ATF prices to push airlines into Rs 10,000 cr loss in FY22: Crisil

The loss is however expected to be 35-40% lower than the projected loss in FY21

Lower domestic air traffic compared with pre-pandemic levels, together with high fuel prices and only a gradual recovery in international operations would result in domestic airlines posting Rs 9,500-10,000 crore net loss in FY 2022, according to a Crisil analysis.

The loss is however expected to be 35-40 per cent lower than the projected loss in FY21, it said.

The second wave of Covid-19 pandemic has already resulted in slowdown in air traffic. Airlines are clubbing flights as booking volumes have slumped around 40 per cent. On Tuesday domestic air traffic fell to 183,331 (first time under 200,000 since last November). On Thursday the Mumbai airport announced consolidation of all operations at terminal 2 (T2) barely a month after shifting a few flights to T1. All domestic and international flights in Mumbai will  now operate from T2 from April 21.

A resurgence of Covid-19 infections across the country -- especially in Mumbai and Delhi, which account for 36 per cent of overall air traffic – is expected to stall the recovery seen over the past six months. In fact, average daily domestic passenger air traffic fell in April by over 15 per cent to around 235,000 compared to February.

“Domestic traffic fell 85 per cent in the first half of last fiscal due to lockdowns and restrictions on operations. Despite the second wave-induced fresh curbs, which will temper recovery, domestic traffic in the first half of this fiscal is likely to be 3.5-4 times higher on-year, on a low base. The second half should see good recovery in traffic, supported by acceleration in the vaccination drive and people gradually taking to travel after prolonged stay at home,” said Gautam Shahi, director of Crisil Ratings.

A gradual recovery in international operations in the second half of fiscal 2022 will also boost traffic. However, airlines have also seen their cost of operations spurt due to a rise in the price of aviation turbine fuel (ATF), a key cost head for them. The price, which remained low until November 2020, limiting their losses, has shot up 30 per cent since then. This will offset the benefits from some of the initiatives the carriers undertook to reduce cost – employee costs, rentals, etc. – last fiscal, and which are being carried forward into the current fiscal.

Fluctuations in crude oil price, foreign exchange rates, prolonged impact of the second wave on domestic traffic volume, and the pace of recovery in international travel, which is more lucrative, will be key monitorables, Crisil said.