The aviation consultancy firm said pilot shortage remains a “structural” issue for airlines, and banks are expected to become “more cautious” with Indian airlines.
The cumulative losses of domestic airlines are likely to come down by two-third at $550-$700 million in FY20 against the earlier projected number of $1.7 billion on account of improvement in fares and prices of jet fuel stabilising at around the current levels, the Centre for Asia Pacific Aviation (CAPA) said in its latest forecast released on Tuesday. It added that strong balance sheets are key for long-term viability and the Indian aviation industry is likely to see new investors in 2-3 Indian carriers in 2019-20.
The aviation consultancy firm said pilot shortage remains a “structural” issue for airlines, and banks are expected to become “more cautious” with Indian airlines. According to CAPA, the Indian aviation industry is likely to see consolidation of “around 4-5 airline groups” and that a clear long-term strategy is not visible for some carriers. It said low-cost carriers (LCCs) could return to profit during the next financial year. Low-cost carriers, which include IndiGo, SpiceJet, GoAir and AirAsia India, are expected to post a combined profit of $100 million-$150 million during FY20, the consultancy firm added.
On the other hand, full-service carriers – Jet Airways, Air India and Vistara – would continue to report losses to the tune of $700-$800 million. While national carrier Air India is surviving on government grants, Jet Airways’ financial condition is precarious and unlikely to improve in the near future.
In terms of passenger traffic, the domestic market will expand by 14-16% in the next financial year. India is the fastest growing aviation market in the world clocking 17-23% year-on-year growth in the last four years mainly on account to cheap fares. CAPA India expects domestic carriers to add more than 90 aircraft during the course of FY20.
CAPA said that it expects airlines to prioritise yields in the next financial year. “The opportunity exists to create a sustainable, profitable future within 1-2 years. This will drive serious investor interest given the size of the market,” CAPA India CEO Kapil Kaul said.