The Indian airlines industry is heading towards consolidation and it could result in a 2-3 airline system in the near to medium term, Centre for Asia Pacific Aviation India (CAPA India) said in its latest report.
Currently, there are six major airlines in India, namely IndiGo, SpiceJet, Air India, AirAsia India, Vistara and GoAir. Tata Sons has a majority stake in AirAsia India (84 percent ) and Vistara (51 percent). In addition, the salt-to-software conglomerate is also one of the bidders in Air India divestment process.
"Following the privatisation of Air India, the airline sector is likely to be dominated by two major players, with a combined domestic market share of around 75-80 percent. The acquisition of MIAL (Mumbai airport) and NMIA (Navi Mumbai airport) by Adani Airports, may result in a two-horse race emerging in the private airport sector," the aviation research and advisory firm said.
Also read:
CAPA India pointed out to the large losses incurred by companies in the aviation industry since March 2020 on account of COVID-19 and estimated the losses to further deepen in FY22 as demand recovery remains uncertain and international traffic will take time to come back to normal.
"Domestic traffic in FY2022 is expected to reach 70-80 percent of FY2020 levels. International traffic is only expected to recover to 35-40 percent of FY2020 levels. In the absence of a full recovery in higher-yielding segments such as corporate travel, airlines cannot be profitable," CAPA India said.
"Airport operators are also expected to increase charges in light of the impact of the pandemic on their financials. They are likely to see continued weakness in non-aero revenue in FY2022,” CAPA India added.
As a result of weak revenue stream, CAPA India has predicted that private airlines are likely to seek nearly $1 billion in debt funding and raising debt from state-owned banks may be the only option due to “visible” reluctance amongst financial institutions.
In a scenario where airlines are not able to attract “very significant” recapitalisation, one or more airlines may head to the National Company Law Tribunal, CAPA India said.
However, among all airlines, IndiGo is expected to emerge significantly stronger than the competition from the COVID-induced weakness, largely due to its “very strong balance sheet.”
As far as government regulations are concerned, CAPA India foresees the cap on air fares for domestic travel to continue at least for the first half of 2021 and expects international flights to continue under the air bubble arrangements for the foreseeable future.
(Edited by : Jomy)
First Published: Jan 5, 2021 7:29 PM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Lok Sabha elections 2024: From Wayanad to Shivamogga, key battles in the second phase
Apr 25, 2024 2:01 PM
EC probes allegations of MCC violation by Modi, Rahul; seeks response by April 29
Apr 25, 2024 1:32 PM
LS polls phase 2: Rahul Gandhi, Shashi Tharoor in fray; Hema Malini, Om Birla eyeing hat-trick
Apr 25, 2024 12:19 PM
UP constituencies to witness three-cornered fight in second phase tomorrow
Apr 25, 2024 10:47 AM