Airlines in India are expected to incur combined revenue losses of up to Rs1.3 lakh crore in the three years through fiscal year 2022 due to the severe hit to air travel from the Covid-19 pandemic, Crisil said on Wednesday.
Airlines may not be able to immediately recoup this loss as growth is not expected to rebound to pre-pandemic levels of a double-digit increase, at least in the medium term, the rating agency said in a report.
“One would have assumed that the expected plunge in crude oil prices to $38-42 per barrel in fiscal 2021 compared with $64-66 per barrel in fiscal 2020 would have helped airline companies to an extent on the margin front as it forms a sizeable 30-45% of an airline’s cost base,” the report said. “But because of the outsized impact of the demand destruction, airlines are curtailing capacity deployment, thereby restricting opportunities for airline companies to accrue the benefit of low crude oil prices,” it added. Meanwhile, airfares, which are currently capped by the government, are expected to drop during the upcoming festive season.
“Interestingly, the fares, capped by the government, are higher on-year today. However, as airlines look to stimulate demand with the onset of the festive season amid the expected removal of the fare cap from end-August, ticket prices on domestic routes are expected to come off from Q3 and will, on an average, be lower on-year this fiscal,” Crisil said.
{{/usCountry}}“Interestingly, the fares, capped by the government, are higher on-year today. However, as airlines look to stimulate demand with the onset of the festive season amid the expected removal of the fare cap from end-August, ticket prices on domestic routes are expected to come off from Q3 and will, on an average, be lower on-year this fiscal,” Crisil said.
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