Indian Airlines under pressure amid COVID-19 surge

Issue: 3 / 2021

Airlines in India are under renewed pressure to raise cash or face the risk of having to downsize, consolidate or have their planes repossessed by lessors as a surge of COVID-19 infections roils travel. Passenger traffic fell by nearly 30 per cent in April 2021 from a month before and has halved again in May 2021, forcing even the country’s biggest and most cashed-up carrier IndiGo, to prepare for action. With traffic plummeting, as per an analyst, IndiGo’s cash burn is expected to rise to $3.4 million a day - a level last seen in September 2020 - from $2 million a day at the end of 2020. This means IndiGo, which has more than a 50 per cent share of the market, may look to raise $543 million to $679 million amounting to at least two quarters of cash burn, said the analyst. While IndiGo is seen as a survivor, the situation is worse for smaller carriers, particularly those without large backers, some of which were struggling before the novel COVID-19 pandemic hit, analysts say. “India hasn’t provided much government assistance or support so the private airlines will need to turn to the private sector,” independent aviation analyst Brendan Sobie said.

To make matters worse, several countries, including Britain and the US with whom India has had bilateral arrangements to operate charter flights, have restricted arrivals because of high infection rates. As per CAPA, the charters offered a lucrative revenue stream for local carriers after the Indian government shut down regular international flights when the pandemic hit. A recovery in international traffic to pre-COVID levels is expected only by 2024. The cash call comes as Indian carriers are expected to report total loss of around $4.5 billion in the fiscal year that ended on March 31 and will lose a similar amount this year, aviation consultancy CAPA India said.