Indian aviation industry at breaking point, warns CAPA

Indian aviation industry is at its breaking point due to massive losses on account of COVID-19, aviation consultancy firm CAPA India has warned.

"The record quarterly loss of $380 million posted by IndiGo in 1QFY2021 is consistent with CAPA India's earlier projection of a consolidated industry loss of $1.50-1.75 billion. With Q2 largely a washout due to poor demand, the industry is at a breaking point," CAPA India wrote on Twitter.

It further added that most airlines in India do not have the holding power to survive and multiple airline failures could set back air connectivity in India by 3-5 years.

Global airlines less hopeful on COVID-19 recovery

The sharp remarks from CAPA India comes at a time when the two largest airlines in the country reported massive losses for January-March and April-June quarters due to unprecedented drop in demand during the COVID-19 pandemic and complete shutdown of regular passenger flights for two months starting March 25.

Today, IndiGo, the largest airline in India, posted a net loss of Rs 2,844 crore for the April-June period. It had recorded a net profit of Rs 1,203 crore in the same period a year ago, primarily on account of gains after the shutdown of Jet Airways, the second largest airline then.

The earnings before interest, tax, depreciation, amortisation and rent margin for IndiGo stood at (-) 185 percent for the June quarter. It had posted a EBITDAR margin of 29.5 percent in the same period a year ago. Total cash balance for IndiGo as of June 30 was down by Rs 1,927 crore since March 31 and stood at Rs 18,450 crore.

Also read: Explained: International travel restarts via 'air bubbles'; who's allowed

For SpiceJet, the second largest airline in the country, it was a net loss of Rs 807 crore during the Q4 of 2019-20 or January-March of 2020. The airline had posted a net profit of Rs 56 crore in the year-ago period. The losses are largely on account of COVID-19 and grounding of B737 MAX aircraft since March 2019.

While SpiceJet has assumed Rs 134 crore as other income, which it plans to receive from Boeing as compensation for grounding of 13 B737 MAX aircraft, it is yet to receive the payment. The independent auditor of the airline has flagged the existence of a material uncertainty that may cast significant doubts about the group’s ability to continue as a going concern.