Domestic Airlines may face $1.65-1.90 billion losses: CAPA

airlines in India

Domestic airlines industry is expected to face $1.65-1.90 billion losses in the current fiscal. An increase from the previously predicted $430-460 million due to volatile crude oil prices and a fall in rupee. Despite the increased losses and subsequent risks, CAPA states that the macro economic stability remains strong.

Full service Carrier

Center for Asia Pacific Aviation (CAPA) in its Mid-Year Aviation Outlook 2019 stated that the Indian aviation industry must raise $3 billion shortly with the expenses of full service carrier at $2.6 billion. Owing to lack of profits in international routes and less cost effective domestic services full service carrier could face $1.75-2 billion losses. Government-owned Air India, Jet Airways and Vistara fall in this category.

A full service airline typically offers passengers in flight entertainment,checked baggage, meals, beverages and comforts such as blankets and pillows in the ticket price

According to the CAPA though the three airlines- IndiGo, GoAir, SpiceJet could break even in the current fiscal, there are still chances for loss making.

CAPA report –

At that time (since January) CAPA India forecast a consolidated industry loss of USD 430-460 million, subject to oil remaining below USD 70/barrel and the US dollar exchange rate at Rs 65-67. Our revised forecast is for an industry loss of USD 1.65-1.90 billion in FY 2019. These projections assume oil at USD75-80/barrel and the exchange rate at Rs 70-72

With airlines offering low fares, demand for travel will be stimulated. As a result, the domestic traffic is expected to grow at 18-20 per cent this year, and international at 10-12 per cent, consistent with the CAPA India forecast in January.

We do not see this as a downward cycle at this stage. The trigger for that would be sustained oil prices above USD 80/barrel and the exchange rate remaining at Rs 70-72.

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