The recovery in domestic passenger traffic is contingent on factors such as containment of the COVID-19 pandemic, willingness of consumers to undertake leisure travel, recovery in macroeconomic growth, and recovery in business travel.
"The two listed airlines (IndiGo and SpiceJet) have together lost around Rs 31 crore per day during the first half of the fiscal," said Icra Vice-President Kinjal Shah.
She added that the airlines' daily cash burn started reducing, as gradually they recommended domestic operations, along with continued chartered and cargo operations, thereby resulting in significantly higher yields.
"This resulted in a lower daily loss of around Rs 26 crore for these two airlines in the September quarter against around Rs 37 crore in the June quarter of this fiscal," Shah added.
With a sequential improvement in domestic passenger traffic and continued cost rationalisation initiatives by the airlines supported by benign ATF prices, the daily cash burn for airlines has further reduced in the third quarter of 2020-21, she added.
In the near term, the balance sheets of Indian carriers will remain stressed until the carriers are able to reduce their debt burden through a combination of improvement in operating performance and/ or by way of equity infusion, Icra said.
It has thus maintained its negative credit outlook on the Indian aviation industry.
Shah said, "Icra expects FY2021 to witness a higher decline of 62-64 per cent in domestic passenger traffic, than its earlier estimates of 41-46 per cent decline."
With this, the domestic passenger traffic will reach much lower than the 2010-11 levels, she added. "The recovery in air travel is expected to be gradual once the COVID-19 threat is allayed."
The impact of the pandemic will be more profound and last longer on international travel compared to domestic travel, the ratings agency said.
It added that in addition to the above-stated factors determining the recovery in passenger traffic, the recovery in international travel is also contingent on the opening up of scheduled international operations by the government.
"Icra expects the FY2021 international passenger traffic for Indian carriers to witness a significant year-on-year decline of around 88-89 per cent, higher than its earlier estimates of about 67-72 per cent decline," Shah said.
Due to the low base of 2020-21, the passenger growth in 2021-22 for both domestic and international operations will be robust; however, it will still be significantly lower than even 2015-16 levels, Icra said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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