COVID-19 impact: Some airlines can shutdown in India due to lack of cash, warns CAPA

As per initial estimates, consolidated losses for all airlines in India, except Air India, in Q1 are expected at $500-600 million but this is bound to be revised downwards later.

The unprecedented lack of demand to travel due to travel advisories and visa restrictions over the spread of coronavirus has resulted in a shock which will be far deeper and much longer than what the world saw in 2008, CAPA added.

As most of the international sectors are already closed due to government advisories to prevent the spread of deadly coronavirus, the International capacity of Indian airlines has fallen by 60-70 percent on the year and could approach a state of suspense.

"Airlines will seek to adjust aircraft deliveries scheduled for Q1 and may cancel some orders. Indian carriers have 50 aircraft due for induction between now and 30 June 2020. But delaying deliveries may impact the liquidity of some carriers that are reliant on sale-and-leaseback margins on aircraft inductions to generate cash. And the availability of financing for deliveries may also be compromised," CAPA said.

The privatisation drive of Air India can also be impacted due to the ongoing disruptive situation and the government may have to provide immediate interim funding of $300-400 million to keep the state airline running.

CAPA has suggested that the government should look at bringing ATF under the GST regime, revise Jet fuel prices on a weekly basis, implement a short-term moratorium, extend credit terms for payments and banks may look at extending working capital loans secured against future sales or sale-and- leaseback incentives.

"Regardless of any fiscal concessions and support that the government may offer, most airlines will have to shrink their operations, and the more vulnerable carriers may shutdown," CAPA reiterated.